Short answers, pulled from the story.
Financial economics emerged as a formal field in 1952 with the introduction of the St. Petersburg paradox which challenged existing views on risk. William F. Sharpe later defined financial economics as a field where money appears on both sides of a trade.
The Journal of Economic Literature classifies Financial Economics under code JEL: G placing it between Monetary and International Economics and Public Economics. This classification reflects its reliance on microeconomic principles to explain decisions involving money exchange.
John Burr Williams published The Theory of Investment Value in 1938 to propose calculating asset worth via present value rules. This work established foundational methods for aggregating future cash flows into single numbers for comparison.
Volatility smiles appeared after the 1987 crash showing higher implied volatilities for out-of-the-money options. These anomalies led to models like Heston and SABR that treat volatility as a stochastic process rather than a constant.
Maureen O'Hara defined market microstructure as analyzing how specific trading mechanisms affect price formation processes. Exchange rules determine transaction costs quotes volume and overall trading behavior in real markets.