The Blank Swan: The End of Probability

by Elie Ayache (Paris, France )

• ISBN13: 9780470661765
• ISBN10: 0470661763
• Format: eBook
• Copyright: 2010-05-01
• Publisher: Wiley

Summary

October 19th 1987 was a day of huge change for the global finance industry. On this day the options market crashed, the Nobel Prize winning Black-Scholes formula failed and volatility smiles were born, and on this day Elie Ayache began his career, on the trading floor of the French Futures and Options Exchange.Experts everywhere sought to find the cause of the crisis, and ways to avoid a recurrence in the future, but the one thing that struck Elie that day was the belief that what actually happened on 19th October 1987 is simply non reproducible outside 19th October 1987 - you cannot reduce it to a chain of causes and effects that can then be reproduced or prevented in a theoretical model. The Blank Swan is Elie's highly original treatise on the financial markets - presenting a totally revolutionary rethinking of derivative pricing and technology. It is not a diatribe against Nassim Taleb's The Black Swan, but criticises the whole background or framework of predictable and unpredictable events - white and black swans.In this revolutionary book, Elie redefines the components of the models needed to price and trade derivatives, and redefines the actual trading of derivatives and derivative pricing. Most importantly he redefines the market itself against the common perceptions of both orthodox financial theory and the sociology of finance.This book will change the way that we think about options and trade volatility and establishes the missing link between quantitative modelling and the reality of the market.

Table of Contents

Introduction

Writing and Event

Writer of The BLANK Swan

Prediction versus Prescription

Generalizing Prediction

The Derivatives Market

The Writing of Derivatives

First Steps on the Surface

Introducing Contingency

The Pricing Surface

The Event of the Market

From States of the World to Market Prices

The Black-Scholes-Merton Paradigm

The Critique of Derivative Pricing Theory

The Necessity of Meta-Contextual Ascent

Writing and the Market

Pierre Menard

Reading and Writing

Approaching the Market

Absolute Contingency and the Return of Speculation

The Necessity of Contingency

Against Speculation

Speculative Materialism

Passage to the Future

From Possibility to Inexistence

The Passage

The Future 156

Necessity of the Future

A Model World

The Implied Absolute

Necessity of Writing

Radical Speculation

The Pricing Alternative

From the Market to Work

Flight to Sydney, or the Genesis of the Book

The Mathematics of Price

The Absolute without Thought

The Absolute within Thought

Barton Fink

The Pledge

The Turn

The Narrative Adventure

The Line of Flight

The POINT of the World

Out of the Box

The Purple Gastropod

The Point of Return, the Point of Inversion

How to be a Writer

The Prestige

Finding the Market, Binding the Book

Absolute Deterritorialization

The Geographical Process

The Field of Ruins

Landing on the Market

Conversion of Credit Into Equity, or the Genesis of the Market

History of the Market

The Conversion

Possibility versus Contingency

The Market

From Debt to Equity

Deduction of the Contingent Claim

Deduction of the Exchange

Deduction of Price

The Market and the Philosophy of Difference

The Pit of Price

The Market and Time

The Market and Difference

Future of the Market

The Category of Price

The Step Beyond

Place and Contingency

Conclusion

Appendix 1 The Logic and Mathematics of Regime Switching

Description of the Regime-Switching Model

General Backward Equations

Credit Default Swaps

Calibration

Recalibration

Appendix 2 From 'Being and Time' to 'Being and Place' with Jeff Malpas

Bibliography

Index

Table of Contents provided by Publisher. All Rights Reserved.