Risk Aversion and Complete Markets

This lecture covers the concepts of risk aversion and complete markets in the context of macro-finance. The instructor discusses the implications of uncertainty in a two-period model, focusing on optimal behavior, risk neutrality, and the log case example. The lecture also explores the individual's expected utility, Arrow-Debreu securities, and the marginal rate of substitution. Furthermore, it delves into the current account, interest rates, and the law of comparative advantage. Overall, the lecture provides a comprehensive overview of how risk aversion influences decision-making in financial markets.