# Financial Theory

Yale, , Prof. John Geanakoplos

Updated On 02 Feb, 19

Yale, , Prof. John Geanakoplos

Updated On 02 Feb, 19

Why Finance? - Utilities, Endowments, and Equilibrium - Computing Equilibrium - Efficiency, Assets, and Time - Present Value Prices and the Real Rate of Interest - Irving Fisher's Impatience Theory of Interest - Shakespeare's Merchant of Venice and Collateral, Present Value and the Vocabulary of Finance - How a Long-Lived Institution Figures an Annual Budget. Yield - Yield Curve Arbitrage - Dynamic Present Value - Social Security - Overlapping Generations Models of the Economy - Demography and Asset Pricing: Will the Stock Market Decline when the Baby Boomers Retire? - Quantifying Uncertainty and Risk - Uncertainty and the Rational Expectations Hypothesis - Backward Induction and Optimal Stopping Times - Callable Bonds and the Mortgage Prepayment Option - Modeling Mortgage Prepayments and Valuing Mortgages - History of the Mortgage Market: A Personal Narrative - Dynamic Hedging - Dynamic Hedging and Average Life - Risk Aversion and the Capital Asset Pricing Theorem - The Mutual Fund Theorem and Covariance Pricing Theorems - Risk, Return, and Social Security - The Leverage Cycle and the Subprime Mortgage Crisis - The Leverage Cycle and Crashes

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4.1 ( 11 )

Financial Theory (ECON 251)

This lecture gives a brief history of the young field of financial theory, which began in business schools quite separate from economics, and of my growing interest in the field and in Wall Street. A cornerstone of standard financial theory is the efficient markets hypothesis, but that has been discredited by the financial crisis of 2007-09. This lecture describes the kinds of questions standard financial theory nevertheless answers well. It also introduces the leverage cycle as a critique of standard financial theory and as an explanation of the crisis. The lecture ends with a class experiment illustrating a situation in which the efficient markets hypothesis works surprisingly well.

Complete course materials are available at the Open Yale Courses website httpopen.yale.educourses

This course was recorded in Fall 2009.

Sam

Sep 12, 2018

Excellent course helped me understand topic that i couldn't while attendinfg my college.

Dembe

March 29, 2019

Great course. Thank you very much.