MATH Seminar

Title: The Mathematical Foundations of Finance
Lecture: Annual Evans/Hall Lecture Series
Speaker: Joshua M. Pollet of Broad College of Business, Michigan State University
Contact: Steve Batterson, sb@mathcs.emory.edu
Date: 2011-04-26 at 4:00PM
Venue: E208
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Abstract: Even though finance is a relatively modern area of academic interest, the key innovations in finance are based on straightforward mathematical models. These models are often designed to mimic the decision making process of individuals in the context of saving behavior and portfolio choice. Of course, the process of building useful models reflects a trade-off between tractability and applicability, that is, simple models are less difficult to analyze, but they may not reflect reality with sufficient accuracy. In spite of the dangers posed by oversimplification, the importance of building useful models cannot be emphasized enough. Such models will have interesting secondary implications that may or may not have been anticipated, but are nevertheless testable. The specific models to be outlined include the basic intertemporal saving decision, static portfolio choice, the Capital Asset Pricing Model (CAPM), and asset pricing with irrational investors.