Lecture 2 - The Universal Principle of Risk Management: Pooling and the Hedging of Risks

author: Robert J. Shiller, Department of Economics, Yale University
recorded by: Yale University
published: Oct. 7, 2009,   recorded: March 2008,   views: 13283
released under terms of: Creative Commons Attribution No Derivatives (CC-BY-ND)
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Description

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.

Reading assignment:

Jeremy Siegel, Stocks for the Long Run, chapter 1 and Appendix 2 (p. 12)

Resources:

PowerPoint slides from screen - Lecture 2[PDF]
Problem Set 1: Probability [PDF]

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