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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