Ready To Risk It All Part II, Continuous Processes

The dog days of summer are fast approaching. Even from my air-conditioned office cubicle, I can feel the temperature outside rising – and my productivity levels decreasing with each additional degree. But I’m looking forward to the heat for more reasons than just excuses to borrow my friend’s pool. As the dog days of summer approach, I literally see more dogs out and about when I go outside. As a dog-deprived graduate student, this is the time of year that I live for. In addition to creeping on the dogs of D.C., I am constantly obsessing over my friend’s dogs. Whenever I see my friends’ puppies, I’m always amazed at the dramatic amount of change that has occurred since I saw them last. It’s a truly incredible phenomenon how quickly puppies seem to grow when you only see them in discrete time intervals! Living with a pup that you interact with on the daily, however, you barely notice the change. Continue reading “Ready To Risk It All Part II, Continuous Processes”

Ready To Risk It All Part I, Options Pricing

Imagine what your life could be like if for any situation you could enjoy the upside without suffering any of the downside. Say you love the color yellow, but it totally washes out your skin tone. Or, perhaps you really want to Keep Up With The Kardashians but unfortunately there aren’t enough hours in the day to follow the entire family’s Instagram accounts. It seems like all choices we have in life have a downside, but what if I told you that in financial markets there are contracts with no downside? No, I’m not trying to sell you timeshares. I’m talking about options pricing. Continue reading “Ready To Risk It All Part I, Options Pricing”

Michael Spence — Signalin’ with Brooks Brothers and Bro-Country Music

Say you walk into Brooks Brothers and the staff ignore you. Why would this happen? Although the staff have no concrete information about your budget, they can examine your age, style, and demeanor to assume that you certainly cannot afford anything in the store, except for maybe a single sock. We see social experiment videos showing this type of behavior all the time. Ugh, these filthy salespeople and their brazen judgment. This rather scandalous judging, though, can be applied to help solve the information asymmetry problem. We say that information is asymmetric whenever one person involved in a transaction knows more than the other. Continue reading “Michael Spence — Signalin’ with Brooks Brothers and Bro-Country Music”