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ECON 252: Financial Markets

Lecture 02 - The Universal Principle of Risk Management: Pooling and the Hedging of Risks. Statistics and mathematics underlie the theories of finance. Probability Theory and various distribution types are important to understanding finance. Risk management, for instance, depends on tools such as variance, standard deviation, correlation, and regression analysis. Financial analysis methods such as present values and valuing streams of payments are fundamental to understanding the time value of money and have been in practice for centuries. (from oyc.yale.edu)

Lecture 02 - The Universal Principle of Risk Management: Pooling and the Hedging of Risks

Time Lecture Chapters
[00:00:00] 1. The Etymology of Probability
[00:10:01] 2. The Beginning of Probability Theory
[00:15:38] 3. Measures of Central Tendency: Independence and Geometric Average
[00:33:12] 4. Measures of Dispersion and Statistical Applications
[00:50:39] 5. Present Value
[01:03:46] 6. The Expected Utility Theory and Conclusion

References
Lecture 2 - The Universal Principle of Risk Management: Pooling and the Hedging of Risks
Instructor: Professor Robert J. Shiller. Resources: Lecture 2 [PDF]; Problem Set 1: Probability [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov].

Go to the Course Home or watch other lectures:

Lecture 01 - Finance and Insurance as Powerful Forces in Our Economy and Society
Lecture 02 - The Universal Principle of Risk Management: Pooling and the Hedging of Risks
Lecture 03 - Technology and Invention in Finance
Lecture 04 - Portfolio Diversification and Supporting Financial Institutions (CAPM Model)
Lecture 05 - Insurance: The Archetypal Risk Management Institution
Lecture 06 - Efficient Markets vs. Excess Volatility
Lecture 07 - Behavioral Finance: The Role of Psychology
Lecture 08 - Human Foibles, Fraud, Manipulation, and Regulation
Lecture 09 - Guest Lecture by David Swensen
Lecture 10 - Debt Markets: Term Structure
Lecture 11 - Stocks
Lecture 12 - Real Estate Finance and its Vulnerability to Crisis
Lecture 13 - Banking: Successes and Failures
Lecture 14 - Guest Lecture by Andrew Redleaf
Lecture 15 - Guest Lecture by Carl Icahn
Lecture 16 - The Evolution and Perfection of Monetary Policy
Lecture 17 - Investment Banking and Secondary Markets
Lecture 18 - Professional Money Managers and Their Influence
Lecture 19 - Brokerage, ECNs, etc.
Lecture 20 - Guest Lecture by Stephen Schwarzman
Lecture 21 - Forwards and Futures
Lecture 22 - Stock Index, Oil and Other Futures Markets
Lecture 23 - Options Markets
Lecture 24 - Making It Work for Real People: The Democratization of Finance
Lecture 25 - Learning from and Responding to Financial Crisis I (Lawrence Summers)
Lecture 26 - Learning from and Responding to Financial Crisis II (Lawrence Summers)