This video provides a crash course in what managers need to know about finance. Joe Knight, coauthor of the Financial Intelligence series, provides an insight into what you need to know and how to read the numbers.
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Leverage Cycle and the Subprime Mortgage Crisis
Standard financial theory left us woefully unprepared for the financial crisis of 2007-09. Something is missing in the theory. In the majority of loans the borrower must agree on an interest rate and also on how much collateral he will … Continued
Risk, Return, and Social Security
This lecture addresses some final points about the CAPM. How would one test the theory? Given the theory, what’s the right way to think about evaluating fund managers’ performance? Should the manager of a hedge fund and the manager of … Continued
The Mutual Fund Theorem and Covariance Pricing Theorems
This lecture continues the analysis of the Capital Asset Pricing Model, building up to two key results. One, the Mutual Fund Theorem proved by Tobin, describes the optimal portfolios for agents in the economy. It turns out that every investor … Continued
Risk Aversion and CAPM
Until now we have ignored risk aversion. The Bernoulli brothers were the first to suggest a tractable way of representing risk aversion. They pointed out that an explanation of the St. Petersburg paradox might be that people care about expected … Continued
Dynamic Hedging and Average Life
This lecture reviews the intuition from the previous class, where the idea of dynamic hedging was introduced. We learn why the crucial idea of dynamic hedging is marking to market: even when there are millions of possible scenarios that could … Continued
Dynamic Hedging
Suppose you have a perfect model of contingent mortgage prepayments, like the one built in the previous lecture. You are willing to bet on your prepayment forecasts, but not on which way interest rates will move. Hedging lets you mitigate … Continued
CFA Exam – What You Must Know
This video provides an overview of the CFA exam and what everyone planning to take the exam must know.
Net Present Value of a Project
This video explains the concept of net present value (NPV) and shows how it is calculated.
Modeling Mortgage Prepayments and Valuing Mortgages
A mortgage involves making a promise, backing it with collateral, and defining a way to dissolve the promise at prearranged terms in case you want to end it by prepaying. The option to prepay, the refinancing option, makes the mortgage … Continued
