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 Until now, the models we’ve used in this course have focused on the case where everyone can perfectly forecast future economic conditions. Clearly, to understand financial markets, we have to incorporate uncertainty into these models. The first half of this lecture continues reviewing the key statistical concepts that we'll need to be able to think seriously about uncertainty, including expectation, variance, and covariance. We apply these concepts to show how diversification can reduce risk exposure. Next we show how expectations can be iterated through time to rapidly compute conditional expectations: if you think the Yankees have a 60% chance of winning any game against the Dodgers, what are the odds the Yankees will win a seven game series once they are up 2 games to 1? Finally we allow the interest rate, the most important variable in the economy according to Irving Fisher, to be uncertain. We ask whether interest rate uncertainty tends to make a dollar in the distant future more valuable or less 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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