Financial Theory with John Geanakoplos - 7. Shakespeare's Merchant of Venice and Collateral, Present Value and the Vocabulary of Finance

Financial Theory (ECON 251) While economists didn't have a good theory of interest until Irving Fisher came along, and didn't understand the role of collateral until even later, Shakespeare understood many of these things hundreds of years earlier. The first half of this lecture examines Shakespeare's economic insights in depth, and sees how they sometimes prefigured or even surpassed Irving Fisher's intuitions. The second half of this lecture uses the concept of present value to define and explain some of the basic financial instruments: coupon bonds, annuities, perpetuities, and mortgages. 00:00 - Chapter 1. Introduction 01:23 - Chapter 2. Contracts in Merchant of Venice 20:23 - Chapter 3. The Doubling Rule 36:07 - Chapter 4. Coupon Bonds, Annuities, and Perpetuities 54:24 - Chapter 5. Mortgage 59:15 - Chapter 6. Applications of Financial Instruments Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses This course was recorded in Fall 2009.