The Stock Market - Robert Merton

Name: The Stock Market - Robert Merton
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Understand Economics

Created byEDOOTV - The knowledge dispenser

Last updated 5/2015

English

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What you'll learn

18 masterclasses and 1 hour and more of content
You will learn about the concept of risk in economics and finance
You will learn what the derivatives are and why they are synonymous of great fear

Course content

3 sections • 19 lectures • 1h 35m total length

Introduction0:37
Financial economy4:16
Define economics as measuring and managing risk within the financial system, highlight the time value of money, and show how capital markets allocate risk to foster growth.
The problem of risk2:36
Learn how risk in economics and finance reflects potential losses amid market volatility, detailing systematic versus specific risk, diversification benefits, currency and liquidity exposure, and derivatives as insurance.
Derivatives contracts and risk prevention5:05
Derivatives transfer risk by deriving value from underlying assets, with call options, put options, futures, and swaps enabling efficient risk exchange and low-cost reversibility across currencies and markets.
Derivatives2:17
Derivatives derive value from underlying economic activity and transfer or insure against risk, serving as insurance or speculation, amid debates after the 2008 financial crisis.
Banks and risk management8:09
Explore how derivative contracts, especially interest rate swaps, transfer banks' interest rate risk by swapping fixed for floating rates, enabling stable profits and large-scale risk management across markets.

The development of an invention6:40
Trace the origins of derivatives from a turn-of-the-century French mathematician and early option pricing. Highlight 1970s shocks and Bretton Woods collapse that spurred organized markets and advances in option pricing.
The Black, Scholes and Merton model2:45
Examine the Black-Scholes-Merton model for pricing derivatives, highlighting the 1973 derivation of the option pricing formula and its Nobel Prize legacy.
Three economists and a Nobel Prize winner4:15
Three economists developed the Black–Scholes formula to price put and call options and assess their risk, enabling fast hedging. The 1973 Chicago Board Options Exchange accelerated adoption of the method.
The market of mortgages4:22
Explore how a national mortgage market emerged to supply mortgage money, and how mortgage pricing hinges on prepayment and default options, viewed as embedded put options.
Derivatives and the financial crisis3:10
Explore how derivatives transferred risk from subprime mortgages to investors, fueling the 2008 financial crisis and the global credit crunch.
Possible applications: from cinema to pharmaceuticals6:25
Apply option thinking to decisions from film sequels and healthcare plan tradeoffs to phased drug discovery and convertible power plants, highlighting optionality and staged investments.
How to determine the price of the options6:22
Explore how options, including put options, are priced using the robust Black-Scholes methodology, revealing a dynamic, continuous-time trading approach to eliminate market risk.
Elimination of risk9:42
Explore how eliminating risk through replication and absence of arbitrage reframes option pricing as a production process, synthesizing derivatives from stock and cash.

Causes of the financial crisis6:44
Explore how financial innovation and modern tools shaped credit markets and fueled the 2008–09 crisis, and why structural elements require oversight and infrastructure.
Mathematical models6:15
Combine the model, the user, and the application to evaluate effectiveness of mathematical models in finance. Emphasize human judgment and override when the model operates outside its range.
From insurance risk to speculation2:09
Explore how credit default swaps transfer credit exposure and reflect sovereign risk, with premiums signaling investor expectations and influencing public debt dynamics. Examine how speculation and a large CDS market, often higher than bonds, prompt regulatory measures for derivatives and risk management.
Symptoms and solutions to a crisis6:35
Explore how fear in a crisis comes from not understanding what's happening and examine the role of complex structured products and credit default swaps.
What we learn from the past7:32
Analyze past crises by weighing Lehman’s 2008 bailout against letting it fail, contrast LTCM’s near-collapse, and argue that wiping out equity holders can deter risk while preserving contracts.

Requirements

Interest in economics
Attending the course does not need any economic skill since it is presented in a clear and simple manner

Description

In this masterclass Economist Robert Merton, Nobel Prize Winner in 1997, reveals to us the mechanisms of the stock market and financial economy.

A journey into the complex world of finance and the stock market, including mortgage loans and derivatives, speculative bubbles and mathematical models; in a clear and precise presentation, the opportunities and risks of a fundamental instrument for understanding the evolution of the economy.

From literature to economics, art to philosophy, EdooTv gives voice to the world's leading experts, describing and sharing ideas and knowledge that are essential for all of us.

Who this course is for:

Everyone interested in economics and who would like to learn more about the stock market and its mechanisms

The Stock Market - Robert Merton

What you'll learn

Explore related topics

Course content

The risk in economics and finance6 lectures • 23min

The stock market and the financial instruments8 lectures • 44min

Financial crisis and potential solutions5 lectures • 29min

Requirements

Description

Who this course is for: