1. Introduction In this post I work through the main result in Arora, Barak, Brunnermeier and Ge (2012) which formulates a simple securitization setting with $I$ underlying assets (e.g., mortgages) and $J$ derivative assets (e.g., CDOs) … [Continue reading]

# Notes: Gabaix (2012)

1. Introduction In this post, I review the sparsity based model of bounded rationality introduced in Gabaix (2011) and then extended in Gabaix (2012). In the baseline framework presented in Gabaix (2011), a boundedly rational agent faces the … [Continue reading]

# Notes: Ait-Sahalia and Jacod (2010)

1. Introduction In this post, I summarize the econometric method introduced in Analyzing the Spectrum of Asset Returns (JEL 2011) by Yacine Ait-Sahalia and Jean Jacod. From an economic perspective, Delbaen and Schachermayer (1994) (Theorem $1.1$) … [Continue reading]

# Notes: Kristensen and Mele (2011)

1. Introduction In this post, I work through Adding and Subtracting Black Scholes, JFE (2011) by Antonio Mele and Dennis Kristensen. This paper develops a method for approximating the price of an asset where no closed form expression exists. In the … [Continue reading]

# The Buckingham Pi Theorem

1. Introduction In this post I outline the Buckingham $\pi$ Theorem which shows how to use dimensional analysis to compute answers to seemingly intractable physical problems. For instance, in $1950$ Geoffrey Taylor used the theorem to work out the … [Continue reading]