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Reviews (1)

Ye Chin Kim


This course attempts to explain the role and the importance of the financial system in the global economy. Rather than separating off the financial world from the rest of the economy, financial equilibrium is studied as an extension of economic equilibrium. The course also gives a picture of the kind of thinking and analysis done by hedge funds.

Course Contains

32 hours of lecture videos

26 lectures

Course books


John Geanakoplos is James Tobin Professor of Economics at Yale University. He received his Ph.D. in Economics from Harvard University in 1980. He has been Director of the Cowles Foundation for Research in Economics, co-Director of Hellenic Studies Program at Yale, chairman of the science steering committee at the Santa Fe Institute and Managing Director of Fixed Income Research at Kidder, Peabody & Co. Prizes he received include the Samuelson Prize (1999), and the Bodossaki Prize in economics (1994). He is a member of the American Academy of Arts and Sciences (since 1999) and was visiting professor at MSRI in the UC Berkeley, Churchill College, Cambridge, the University of Pennsylvania, Harvard, Stanford, and MIT. He was one of the founding partners of Ellington Capital Management, where he remains a partner. One of his current research topics is the leverage cycle.


Creative Commons License

ECON 25: Financial Theory by Professor John Geanakoplos is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. Based on a work at Open Yale Courses.

Course content

  • Lecture 1 - Why Finance?

  • Lecture 2 - Utilities, Endowments, and Equilibrium

  • Lecture 3 - Computing Equilibrium

  • Lecture 4 - Efficiency, Assets, and Time

  • Lecture 5 - Present Value Prices and the Real Rate of Interest

  • Lecture 6 - Irving Fisher's Impatience Theory of Interest

  • Lecture 7 - Shakespeare's Merchant of Venice & Collateral, Present Value & the Vocabulary of Finance

  • Lecture 8 - How a Long-Lived Institution Figures an Annual Budget; Yield

  • Lecture 9 - Yield Curve Arbitrage

  • Lecture 10 - Dynamic Present Value

  • Lecture 11 - Social Security

  • Lecture 12 - Overlapping Generations Models of the Economy

  • Lecture 13 - Demography & Asset Pricing: Will the Stock Market Decline when the Baby Boomers Retire?

  • Lecture 14 - Quantifying Uncertainty and Risk

  • Lecture 15 - Uncertainty & the Rational Expectations Hypothesis

  • Lecture 16 - Backward Induction and Optimal Stopping Times

  • Lecture 17 - Callable Bonds and the Mortgage Prepayment Option

  • Lecture 18 - Modeling Mortgage Prepayments and Valuing Mortgages

  • Lecture 19 - History of the Mortgage Market: A Personal Narrative

  • Lecture 20 - Dynamic Hedging

  • Lecture 21 - Dynamic Hedging and Average Life

  • Lecture 22 - Risk Aversion and the Capital Asset Pricing Theorem

  • Lecture 23 - The Mutual Fund Theorem and Covariance Pricing Theorems

  • Lecture 24 - Risk, Return, and Social Security

  • Lecture 25 - The Leverage Cycle and the Subprime Mortgage Crisis

  • Lecture 26 - The Leverage Cycle and Crashes

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