Rong Ge will present his research seminar/general exam on Tuesday May 18 at 2PM in Room 402. The members of his committee are: Sanjeev Arora (advisor), Boaz Barak, and Ken Steiglitz. Everyone is invited to attend his talk, and those faculty wishing to remain for the oral exam following are welcome to do so. His abstract and reading list follow below. ------------------------------------------------ Title: Computational Complexity and Information Asymmetry in Financial Products Abstract: Traditional economics argues that financial derivatives, like CDOs and CDSs, ameliorate the negative costs imposed by asymmetric information. This is because securitization via derivatives allows the informed party to find buyers for less information-sensitive part of the cash flow stream of an asset (e.g., a mortgage) and retain the remainder. In this paper we show that this viewpoint may need to be revised once computational complexity is brought into the picture. Using methods from theoretical computer science this paper shows that derivatives can actually amplify the costs of asymmetric information instead of reducing them. Note that computational complexity is only a small departure from full rationality since even highly sophisticated investors are boundedly rational due to a lack of requisite computational resources. Reading List: Books: Sanjeev Arora and Boaz Barak. Computational Complexity: A Modern Approach. Cambridge University Press, 2009. Thomas H. Cormen, Charles E. Leiserson, Ronald L. Rivest, and Clifford Stein. Introduction to Algorithms, Third Edition. The MIT Press, 2009. Papers: Benny Applebaum, Boaz Barak, and Avi Wigderson. Public key cryptography from different assumptions. Available from the authors' web pages. To appear in STOC'10. Aditya Bhaskara, Moses Charikar, Eden Chlamtac, Uri Feige, and Aravindan Vijayaraghavan. Detecting high log-density: An o(n^{1/4})-approximation for densest k-subgraph. Manuscript in preparation, to appear in STOC'10. U. Feige, D. Peleg, and G. Kortsarz. The dense k-subgraph problem. Algorithmica, 29(3):410-421, 2001. S. Khot. Ruling out PTAS for graph min-bisection, densest subgraph and bipartite clique. In FOCS, pages 136-145, 2004. G.A. Akerlof. The market for "lemons": quality uncertainty and the market mechanism. The quarterly journal of economics, pages 488-500, 1970. P.M. DeMarzo. The pooling and tranching of securities: A model of informed intermediation. Review of Financial Studies, 18(1):1-35, 2005. M.K. Brunnermeier. Deciphering the 2007-08 liquidity and credit crunch. Journal of Economic Perspectives, 23(1):77-100, 2008