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Yale University

Backward Induction and Optimal Stopping Times in Financial Theory - Lecture 16

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Overview

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This lecture introduces backward induction through optimal stopping games, including chess strategy and the optimal marriage problem. It also explains implied default probabilities and their relationship to forward interest rates.

Syllabus

- Chapter 1. Calculating Default Probabilities
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- Chapter 2. Relationship Between Defaults and Forward Rates
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- Chapter 3. Zermelo, Chess, and Backward Induction
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- Chapter 4. Optimal Stopping Games and Backward Induction
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- Chapter 5. The Optimal Marriage Problem
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