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In the first part of the lecture we wrap up the previous discussion of implied default probabilities, showing how to calculate them quickly by using the same duality trick we used to compute forward interest rates, and showing how to interpret them as spreads in the forward rates. The main part of the lecture focuses on the powerful tool of backward induction, once used in the early 1900s by the mathematician Zermelo to prove the existence of an optimal strategy in chess. We explore its application in a series of optimal stopping problems, starting with examples quite distant from economics such as how to decide when it is time to stop dating and get married. In each case we find that the option to continue is surprisingly valuable.
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Video Length: 0
Date Found: April 29, 2011
Date Produced:
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ACADEMIC EARTH |
May 25, 2011
Professor Snowden describes the final exam, and takes questions from students.
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ACADEMIC EARTH |
May 25, 2011
In the eighteenth century, smallpox succeeded plague as the most feared disease. The two maladies, however, are very different. While plague is a bacterial disease, smallpox is viral. Plague is spread by rats and fleas, smallpox is transmitted by contact and airborne inhalation. Unlike plague, ...
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ACADEMIC EARTH |
May 25, 2011
The next and final Enlightenment tradition to be examined in the class is that of John Rawls, who, according to Professor Shapiro, was a hugely important figure not only in contemporary political philosophy, but also in the field of philosophy as a whole. The class is introduced to some of the ...
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ACADEMIC EARTH |
May 25, 2011
In this lecture, Professor Freeman discusses the Declaration of Independence and sets the document in its historical context. The Declaration was not the main focus of the Second Continental Congress, which was largely concerned with organizing the defensive war effort. The Congress had sent ...
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ACADEMIC EARTH |
May 25, 2011
SARS, avian influenza and swine flu are the first new diseases of the twenty-first century. They are all diseases of globalization, or diseases of modernity, and while relatively limited in their impact, they have offered dress-rehearsals for future epidemics. As information about SARS spread ...
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