As a companion book of Vaudenay's A Classical Introduction to Cryptography,
this exercise book contains a carefully revised version of most
of the material used in teaching by the authors or given as examinations
to the undergraduate students of the Cryptography and Security lecture
at EPFL from 2000 to mid-2005. It covers a majority of the subjects that
make up today's cryptology, such as symmetric or public-key cryptography,
cryptographic protocols, design, cryptanalysis, and implementation
The forward process makes use of the information contained in the
hypothesis A. The backward process tries to find a chain of statements leading
to the fact that the conclusion B is true.
With the backward process, you start with the statement B that you are
trying to conclude is true. By asking and answering key questions, you derive
a sequence of new statements with the property that if the sequence of new
statements is true, then B is true. The backward process continues until you
obtain the statement A or until you can no longer ask and/or answer the key
The US subprime turmoil that first emerged in August 2007 and morphed into an
international financial crisis following the bankruptcy of Lehman Brothers in September 2008
was a shock that affected output globally (BIS (2009)). Long before Lehman’s failure, fear of
counterparty defaults had disrupted interbank funding markets, including both secured and
unsecured money markets.
An efﬁcient capital market is one in which security prices adjust rapidly to
the arrival of new information and, therefore, the current prices of securities
reﬂect all information about the security. What this means, in simple terms,
is that no investor should be able to employ readily available information
in order to predict stock price movements quickly enough so as to make a
proﬁt through trading shares.
The dimension of the stock price-inflation puzzle that generated the greatest sustained
academic interest, however, was the apparent negative relation between expected inflation and
subsequent stock returns. The explanation that garnered early support was known as the “proxy
hypothesis”. First articulated by Fama (1981), this hypothesis held that (i) a rise in inflation
augurs a decline in real economic activity; and (ii) the stock market anticipates the decline in
corporate earnings associated with this slowdown.
The market prices of bank securities, such as equities, provide important in-
formation for market participants, for central banks with Önancial stability re-
sponsibilities, and for bank supervisors, from at least Öve di§erent perspectives.
First, a bankí s equity price may e§ectively summarise all the public informa-
tion available from the bank, including potential risks, in one number.
Indeed, as emphasizes by Shiller and Perron (1985) it is not the frequency
(number of observations) rather the span (number of years) of the data that is more important
to test for random walk hypothesis of economic variables or causal relationships. Secondly,
our monthly database which covers twelve years of data only includes four GCC countries out
of six and doesn’t permit to draw any conclusion about Qatar and United Arab Emirates
which are absent from the database.
Chapter 11 - The efficient market hypothesis. We critically evaluate recent suggestions for “fundamental indexing” as a response to market errors in security valuation. We show that these strategies are nothing more than variations on the value-tilted portfolio strategies discussed earlier in the chapter.