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It is a term for matters regarding the management, creation, and study of money and investments. Finance can be broadly divided into three categories: Public finance Corporate finance Personal finance There are many other specific categories, such as behavioral finance, which seeks to identify the cognitive (e.g., emotional, social, and psychological) reasons behind this decisions. KEY TAKEAWAYS Fin. is a term broadly describing the study and system of money, investments, and other finan. instruments. Finance can be divided broadly into three distinct categories: public fin., corporate finance, and personal fin. More recent subcategories of finance include social and behavioral finance. The history of finance and Its activities dates back to the dawn of civilization. Banks and interest-bearing loans existed as early as 3000 BC. Coins were being circulated as early as 1000 BC. While it has roots in scientific fields, such as statistics, economics, and mathematics, it also includes non-scientific elements that liken it to an art.
It as a study of theory and practice distinct from the field of economics arose in the 1940s and 1950s with the works of Markowitz, Tobin, Sharpe, Treynor, Black, and Scholes, to name just a few. But particular realms of finance—such as banking, lending, and investing, of course, money itself—have been around since the dawn of civilization in some form or another. Around 3000 BC, banking seems to have originated in the Babylonian/Sumerian empire, where temples and palaces were used as safe places for the storage of financial assets—grain, cattle, and silver or copper ingots. Grain was the currency of choice in the country, while silver was preferred in the city.1 The financial transactions of the early Sumerians were formalized in the Babylonian Code of Hammurabi (circa 1800 BC). This set of rules regulated ownership or rental of land, employment of agricultural labor, and credit. Yes, there were loans back then, and yes, interest was charged on them—rates varied depending on whether you were borrowing grain or silver.1 By 1200 BC, cowrie shells were used as a form of money in China. Coined money was introduced in the first millennium BC. King Croesus of Lydia (now Turkey) was one of the first to strike and circulate gold coins around 564 BC—hence the expression, “rich as Croesus.”2