Summary of Ses 1: Introduction and Course Overview

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00:00:00 - 01:00:00

This video is an introduction to a finance course that covers the six principles of finance. The instructor explains that the course will focus on time for the first three or four weeks, and then will introduce risk. He also notes that all agents act to further their self-interest, and that economics has redefined preferences to argue that mother Teresa was selfish.

00:00:00 The video introduces 15 401 finance theory, which is meant for first-year MBA students. The main focus of the course will be first-year MBAs, but other students may attend, too. The instructor will cover what finance is, how it applies to practical management problems, and how important it is for a career in finance. He encourages skepticism about the role of finance in one's career, but ultimately aims to convince all students of the importance of finance and its applicability to a wide range of careers.
00:05:00 The author of this video introduces the course, discusses the importance of teaching ratings, and provides a framework for thinking about financial analysis. He talks about the two main challenges in financial analysis- time and risk- and how they are eliminated in research. He then discusses the six principles of finance, which students will encounter in all of their finance courses.
00:10:00 The video introduces three prominent figures in finance, James Simons, Renaissance Technologies, and Michael Lewis, and discusses their backgrounds and achievements in the field. The introduction explains that finance is the systematic and disciplined study of financial transactions of money, and that mathematics is one of the many disciplines that can be used in this field. The three individuals discussed each have a successful track record in finance, and are examples of the many options available to those with a mathematical background in this field.
00:15:00 James Simons and Warren Buffett are two very successful businessmen who use quantitative methods in their investments. Jack Welch is another successful businessman who is an engineer by training and was able to make good decisions about investments at General Electric, one of the largest companies in the world.
00:20:00 In this video, Professor Shiller presents the four components of the economy - households, financial intermediaries, non-financial corporations, and capital markets - and how each plays a role in financial analysis. He emphasizes the importance of finance, describing it as the "most important subject" because it is the "basis for all business decisions." The two main challenges of finance are valuation, which involves determining the value of assets, and management, which involves deciding what to do with the value of assets once it has been determined.
00:25:00 The video discusses the concept of value and how financial markets help determine its value. It then demonstrates how a bidding process works by having two volunteers bid on an object that is smaller than the other. The high bidder is then determined and the object is auctioned off.
00:30:00 This video introduces Ses 1, a course on valuation that will explore how what happened in the auction--the lack of information--affected the value of the purchased item.
00:35:00 This video introduces the concept of financial valuation, and concentrates on the concept of stock and flow. The course then goes on to discuss accounting, and how it is used in finance. The course then covers the basics of valuation, including stock and flow analysis.
00:40:00 The financial analysis framework that is being discussed in this video is based on the idea that a corporation has certain assets (e.g. cash, investments, real estate) and liabilities (e.g. loans, credit card debts). The framework is used to help make decisions about a company's financial situation at different points in time. Additionally, the video explains that a career in finance can involve a variety of different aspects of the business, and that understanding the cash flow of a company is key to success as a financial officer or shareholder.
00:45:00 This video introduces the concepts of financial analysis and discusses how time and risk can complicate the process. The course will focus on time for the first three or four weeks, and then will introduce risk.
00:50:00 In this video, the instructor introduces the course, Risk and Modern Finance, and explains the six principles of modern finance that will be covered in the course. He explains that these principles are approximations to a more complex truth, and that if you don't believe him or know people who don't satisfy these principles, he would like to meet them after class. He also notes that all agents act to further their self-interest, and that economics has redefined preferences to argue that mother Teresa was selfish. In the last lecture, he will question the framework that he has developed, and show where the approximations were made.
00:55:00 The video introduces the course, which will cover four sections: introductory material, valuation, discounting, and risk. The final section will focus on how to apply the principles to practical circumstances. Attendance and participation will be important in the course, and the midterm and final exams are designed to place most of the weight on the final exam.

01:00:00 - 01:05:00

This is a new pro seminar that will cover topics in finance, such as starting salaries, the career aspects of the industry, and how to best study for the class. Lecture notes will be given out in advance, and students are encouraged to take lots of notes during the lectures. Students are also encouraged to participate in class discussion and ask questions.