Lecture 1 - ECON 3107 Lecture 1 Time-State Claims Valentyn Panchenko March 1th 2011 Organizational Issues References William Sharpe

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ECON 3107 Lecture 1: Time-State Claims Valentyn Panchenko March 1th, 2011
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Organizational Issues I References I William Sharpe, ”Macro-Investment Analysis”, manuscript, Stanford University I Danthine and Donaldson (2005) Chapter 8 I MATLAB Manuals (see Blackboard 9 site) I Assessments I Two assignments (two weeks to complete) 10% I Mid-Session Exam (2 hours) 25% I Final Exam (3 hours) 65%
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Arrow-Debreu Paradigm Kenneth Arrow and Gerard Debreu introduced the concept of (state-) contingent contract: ”A contract for the transfer of a commodity [specifying], in addition to its physical properties, its location and date, an event on the occurrence of which the transfer is conditional.” Gerard Debreu, Theory of Value , The Cowles Foundation Monograph, 1959.
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A Simple Example: An Apple Tree Two time periods: I Time 0 - today; I Time 1 - a year from now Two possible states of the world: I G: good weather I B: bad weather The states of the world are: I mutually exclusive (if one occur, the other cannot) I exhaustive (one of the states must occur)
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Lecture 1 - ECON 3107 Lecture 1 Time-State Claims Valentyn Panchenko March 1th 2011 Organizational Issues References William Sharpe

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