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ECON 252: Financial Markets

Lecture 03 - Technology and Invention in Finance. In the beginning of the lecture, Professor Shiller reviews the probability theory concepts from the last class and extends these concepts by the central limit theorem. Afterwards, he turns his attention toward the role of financial technology and financial invention within society, in particular with regard to the management of big and important risks. He proceeds along the lines of a "framing" theme, referring to the context and the associations of inventions, and along the lines of a "device" theme, emphasizing the creation of complicated structures set up for a certain purpose, which require learning over time to be improved. His coverage of financial inventions spans limited liability for corporations and the framework of Township and Village Enterprises in China, as well as inflation indexation from its inception around the turn of the 19th century to its applications in Chile and Mexico in the 20th century. Professor Shiller concludes the lecture elaborating on swap contracts as financial inventions, and on the subsequent development of credit default swaps. (from oyc.yale.edu)

Lecture 03 - Technology and Invention in Finance

Time Lecture Chapters
[00:00:00] 1. Introduction
[00:02:38] 2. Review of Probability Theory and the Central Limit Theorem
[00:14:21] 3. The Role of Finance in Society
[00:28:52] 4. A Selection of Modern Inventions
[00:39:14] 5. Corporations and Limited Liability
[00:51:33] 6. Inflation Indexation
[01:07:42] 7. Swap Contracts

References
Lecture 3 - Technology and Invention in Finance
Instructor: Professor Robert J. Shiller. Resources: Multiple-Choice Quiz [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov].

Go to the Course Home or watch other lectures:

Lecture 01 - Introduction and What this Course Will Do for You and Your Purposes
Lecture 02 - Risk and Financial Crises
Lecture 03 - Technology and Invention in Finance
Lecture 04 - Portfolio Diversification and Supporting Financial Institutions
Lecture 05 - Insurance, the Archetypal Risk Management Institution, its Opportunities and Vulnerabilities
Lecture 06 - Guest Speaker David Swensen
Lecture 07 - Efficient Markets
Lecture 08 - Theory of Debt, Its Proper Role, Leverage Cycles
Lecture 09 - Corporate Stocks
Lecture 10 - Real Estate
Lecture 11 - Behavioral Finance and the Role of Psychology
Lecture 12 - Misbehavior, Crises, Regulation and Self Regulation
Lecture 13 - Banks
Lecture 14 - Guest Speaker Maurice "Hank" Greenberg
Lecture 15 - Forward and Futures Markets
Lecture 16 - Guest Speaker Laura Cha
Lecture 17 - Options Markets
Lecture 18 - Monetary Policy
Lecture 19 - Investment Banks
Lecture 20 - Professional Money Managers and their Influence
Lecture 21 - Exchanges, Brokers, Dealers, Clearinghouses
Lecture 22 - Public and Non-Profit Finance
Lecture 23 - Finding your Purpose in a World of Financial Capitalism