Great Lesson.. Stochastic discount factor, price as a function of discount factor, consumption growth and payoff, adjusting the C. I really got these after listening this lesson. Highly recommended lesson.
At 9:03 onwards the maximization objective should contain et instead of ct, that is, the original consumption level without investment - then it should be consistent with what’s in the book (page 5)
Because paying asset is actually consumption. We should not think that the consumption is the left amount after buying asset. Cochrane's book Chapter 1, ,n the first paragraph he defines consumption as purchasing asset
@@zeynullahgider6716 in the video, he says I am losing the price of the commodity today which is intuitive. How come its the quantity that falls off in the derivation, leaving only Pt? I would think either the whole thing disappears or the derivative is kPt... please confirm that the derivation is du/dct
@@NYC_butterfly I believe we are doing a taylor expansion, but only use the first term (which seems completely insane to me), but then U'(C_t-kP_t) becomes -P_t*U'(C_t) and the other side also checks out.
Great Lesson.. Stochastic discount factor, price as a function of discount factor, consumption growth and payoff, adjusting the C. I really got these after listening this lesson. Highly recommended lesson.
At 9:03 onwards the maximization objective should contain et instead of ct, that is, the original consumption level without investment - then it should be consistent with what’s in the book (page 5)
At 7:05, as we raise beta, we value future more (not less).
For maximization, after taking derivative, why is it U'(C_t) instead of U'(C_t - kP_t)???
Because paying asset is actually consumption. We should not think that the consumption is the left amount after buying asset. Cochrane's book Chapter 1, ,n the first paragraph he defines consumption as purchasing asset
@@zeynullahgider6716 in the video, he says I am losing the price of the commodity today which is intuitive. How come its the quantity that falls off in the derivation, leaving only Pt? I would think either the whole thing disappears or the derivative is kPt... please confirm that the derivation is du/dct
@@NYC_butterfly I believe we are doing a taylor expansion, but only use the first term (which seems completely insane to me), but then U'(C_t-kP_t) becomes -P_t*U'(C_t) and the other side also checks out.
Games theory Nash Von Neumann Turing.
example of a discrete RV, but draws a Lebesgue-Borel density. This professor needs to learn his stuff before teaching it!