Continuous-Time Methods in Economic Theory

Catalog description

Continuous-time techniques find wide application in econ and finance, beyond Black-Scholes option pricing formula. Used in dynamic models of learning and experimentation, contracting, reputation building, capital structure, financial frictions and macroeconomic crises, trade and information disclosure. Course prepares students to follow and interact with economic theory literature making use of continuous-time techniques. Course organized in two parts. 1) Present useful concepts and tools in stochastic calculus and stochastic control, with emphasis on the Brownian motion. 2) Discuss array of applications from microeconomic theory, macroeconomic, and corporate finance. Prerequisite: Econ 601D