- How did these three laureates' work together lay the foundation for index funds and options pricing?
Financial Economics
The economics of markets, asset pricing, and financial instruments.
- What was a junk bond, and how did Michael Milken use it to reshape corporate finance in the 1980s?
- What charges was Milken indicted on, and what was the outcome of his case?
- What was the traditional principle of unlimited liability that Lloyd's of London 'Names' agreed to?
- What happened when heavy losses in the early 1990s tested the Names' willingness to pay?
- What kind of interest-rate bets caused Orange County to file for the largest municipal bankruptcy of its time?
- What do the Barings and Orange County cases have in common as lessons about leverage?
- How did Robert Merton arrive at the same pricing formula as Black and Scholes independently?
- Why is it notable that Fischer Black died before the prize was awarded?
- What happened to Long-Term Capital Management, and why is that ironic given the laureates' work?
- What is the ARCH model, and what market behavior did Robert Engle design it to capture?
- Why does volatility in financial markets tend to cluster rather than arrive randomly?
- How did Iceland's three major banks grow to hold assets nearly ten times the country's GDP?
- How did mortgage-backed derivatives fail despite being marketed as low-risk?
- What structural mismatch in banking did Diamond and Dybvig's 1983 model formalize?