Oh snap! Lecture videos might not load due to connection issues to source servers. Sorry for inconvenience.

Lec 16 - Backward Induction and Optimal Stopping Times

"Lec 16 - Backward Induction and Optimal Stopping Times" Financial Theory (ECON 251) In the first part of the lecture we wrap up the previous discussion of implied default probabilities, showing how to calculate them quickly by using the same duality trick we used to compute forward interest rates, and showing how to interpret them as spreads in the forward rates. The main part of the lecture focuses on the powerful tool of backward induction, once used in the early 1900s by the mathematician Zermelo to prove the existence of an optimal strategy in chess. We explore its application in a series of optimal stopping problems, starting with examples quite distant from economics such as how to decide when it is time to stop dating and get married. In each case we find that the option to continue is surprisingly valuable. 00:00 - Chapter 1. Calculating Default Probabilities 14:58 - Chapter 2. Relationship Between Defaults and Forward Rates 28:09 - Chapter 3. Zermelo, Chess, and Backward Induction 36:48 - Chapter 4. Optimal Stopping Games and Backward Induction 01:06:47 - Chapter 5. The Optimal Marriage Problem Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses This course was recorded in Fall 2009.

Video is embedded from external source so download is not available.

Channels: Finance

Tags: Lec 16 - Backward Induction and Optimal Stopping Times

Uploaded by: ( Send Message ) on 12-09-2012. Dnatube suggest users to have interest in drug testing, mesothelioma, insurance, medical lawyers.

Duration: 79m 14s

No content is added to this lecture.

Go to course:

This video is a part of a lecture series from of Yale

Dnatube: Sciencific and Medical video site.