7. Shakespeare's Merchant of Venice and Collateral, Present Value and the Vocabulary of Finance

Financial Theory (ECON 251)

While economists didn't have a good theory of interest until Irving Fisher came along, and didn't understand the role of collateral until even later, Shakespeare understood many of these things hundreds of years earlier. The first half of this lecture examines Shakespeare's economic insights in depth, and sees how they sometimes prefigured or even surpassed Irving Fisher's intuitions. The second half of this lecture uses the concept of present value to define and explain some of the basic financial instruments: coupon bonds, annuities, perpetuities, and mortgages.

00:00 - Chapter 1. Introduction
01:23 - Chapter 2. Contracts in Merchant of Venice
20:23 - Chapter 3. The Doubling Rule
36:07 - Chapter 4. Coupon Bonds, Annuities, and Perpetuities
54:24 - Chapter 5. Mortgage
59:15 - Chapter 6. Applications of Financial Instruments

Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses

This course was recorded in Fall 2009.