Readings

All readings are required unless they are indicated as “Optional”. Short quizzes will be administered on each of the dates indicated for required readings.

We will follow the reading schedule given below:

Date

Reading

January 11

1. Optimization (chapter 2 from Managerial Economics, by W. Bruce Allen, Neil Doherty, Keith Weigelt, and Edwin Mansfield, 6th edition (2005))
2. How long does it take to double (triple/quadruple/n-tuple) your money?, by James R. Garven

January 18

1. The New Religion of Risk Management, by Peter Bernstein
2. Normal and standard normal distribution, by James R. Garven

January 25

1. Supply of Insurance, by Greg Niehaus, Univ. of South Carolina
2. Basic Economics: How Individuals Deal with Risk (Doherty, Chapter 2)
3. Introduction to Expected Utility and Risk Preferences, by James R. Garven

February 6

1. Expected Utility, Mean Variance, and Stochastic Dominance, by James R. Garven
2. Stochastic Dominance and Expected Utility (Optional), by James R. Garven
3. A Reexamination of the Relationship Between Preferences and Moment Orderings by Rational Risk Averse Investors (Optional), by Patrick L. Brockett and James R. Garven

February 20

The Demand for Insurance, by James R. Garven

February 22

1. Moral Hazard & Adverse Selection (Doherty, Chapter 3)
2. Moral Hazard & Adverse Selection Synopsis, by James R. Garven
3. Moral Hazard and Insurance, by James R. Garven
4. View the following five YouTube videos: a) Asymmetric Information and Used Cars, b) Asymmetric Information and Health Insurance, c) Moral Hazard, d) Solutions to Moral Hazard, e) Signaling

March 13

1. Portfolio and Capital Market Theory, by James R. Garven
2. Portfolio Theory and Risk Management (Optional; Doherty, Chapter 4)
3. Modern portfolio theory (Optional; source: Wikipedia)
4. Capital Market Theory (Optional; Doherty, Chapter 5)
5. Capital asset pricing model (Optional; source: Wikipedia)

March 20

1. Derivatives and Options (Doherty, Chapter 6)
2. A Simple Model of a Financial Market, by James R. Garven
3. Binomial Option Pricing Model (single-period), by James R. Garven

April 10

1. Why is Risk Costly to Firms? (Doherty, Chapter 7)
2. The Modigliani-Miller Theorems and Corporate Risk Management Theory, by James R. Garven
3. How Insurance Solves the Underinvestment Problem, by James R. Garven
4. A Framework for Risk Management, by Ken Froot, David Scharfstein and Jeremy Stein