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Lecture 15 - Backward Induction and Optimal Stopping Times, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 In the first part of the lecture we wrap up the previous discussion of implied default probabilities, showing how to calculate them quickly by usi...

Lecture 10 - Social Security, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 This lecture continues the analysis of Social Security started at the end of the last class. We describe the creation of the system in 1938 by Fran...

Lecture 13 - Quantifying Uncertainty and Risk, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Until now, the models we’ve used in this course have focused on the case where everyone can perfectly forecast future economic conditions. Clearly...

Lecture 12 - Demography and Asset Pricing, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 In this lecture, we use the overlapping generations model from the previous class to see, mathematically, how demographic changes can influence in...

Lecture 9 - Dynamic Present Value, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 In this lecture we move from present values to dynamic present values. If interest rates evolve along the forward curve, then the present value of...

Lecture 6 - Irving Fisher’s Impatience Theory of Interest, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Building on the general equilibrium setup solved in the last week, this lecture looks in depth at the relationships between productivity, patience...

Lecture 8 - Budgeting for a Long-Lived Institution, Yield, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 In the 1990s, Yale discovered that it was faced with a deferred maintenance problem: the university hadn’t properly planned for important renovati...

Lecture 7 - Collateral, Present Value and the Vocabulary of Finance, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 While economists didn’t have a good theory of interest until Irving Fisher came along, and didn't understand the role of collateral until...

Lecture 5 - Present Value Prices and the Real Rate of Interest, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Philosophers and theologians have railed against interest for thousands of years. But that is because they didn’t understand what causes interest. ...

Lecture 24 - The Leverage Cycle and the Subprime Mortgage Crisis, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Standard financial theory left us woefully unprepared for the financial crisis of 2007-09. Something is missing in the theory. In the majority of l...

Lecture 4 - Efficiency, Assets, and Time, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Over time, economists' justifications for why free markets are a good thing have changed. In the first few classes, we saw how under some...

Lecture 2 - Utilities, Endowments, and Equilibrium, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 This lecture explains what an economic model is, and why it allows for counterfactual reasoning and often yields paradoxical conclusions. Typicall...

Lecture 23 - Risk, Return, and Social Security, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 This lecture addresses some final points about the CAPM. How would one test the theory? Given the theory, what’s the right way to think about eval...

Lecture 3 - Computing Equilibrium, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Our understanding of the economy will be more tangible and vivid if we can in principle explain all the economic decisions of every agent in the ec...

Lecture 21 - Risk Aversion and the Capital Asset Pricing Theorem, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 Until now we have ignored risk aversion. The Bernoulli brothers were the first to suggest a tractable way of representing risk aversion. They point...

Lecture 1 - Why Finance?, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 This lecture gives a brief history of the young field of financial theory, which began in business schools quite separate from economics, and of m...

Lecture 20 - Dynamic Hedging and Average Life, Financial Theory Channel: ACADEMIC EARTH Length: 0 Date: April 29, 2011 This lecture reviews the intuition from the previous class, where the idea of dynamic hedging was introduced. We learn why the crucial idea of dyn...

Lecture 4 - Virtuous Circle of Housing Price Appreciation, Credit Crisis Channel: ACADEMIC EARTH Length: 0 Date: February 14, 2011 The virtuous circle of housing price appreciation making defaults go down making lending lax making housing appreciate even more.

Lecture 2 - The Effect of Lower Lending Standards, Credit Crisis Channel: ACADEMIC EARTH Length: 0 Date: February 14, 2011 How lower lending standards led to housing price inflation.

Lecture 1 - Why Housing Prices Climbed So Quickly, Credit Crisis Channel: ACADEMIC EARTH Length: 0 Date: February 14, 2011 Why did housing prices go up so much from 2000-2006 even though classical supply/demand would not have called for it.

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