2. Risk and Financial Crises

Financial Markets (2011) (ECON 252) Professor Shiller introduces basic concepts from probability theory and embeds these concepts into the concrete context of financial crises, with examples from the financial crisis from 20072008. Subsequent to a historical narrative of the financial crisis from 20072008, he turns to the definition of the expected value and the variance of a random variable, as well as the covariance and the correlation of two random variables. The concept of independence leads to the l