The Medium of Contingency

An Inverse View of the Market
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(414 Seiten)
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ISBN-13:
9781137286567
Einband:
eBook
Seiten:
414
Autor:
Elie Ayache
eBook Typ:
PDF
eBook Format:
eBook
Kopierschutz:
Adobe DRM [Hard-DRM]
Sprache:
Englisch
Beschreibung:

In The Medium of
Contingency Elie Ayache builds upon his ground-breaking book The Blank
Swan, in exploring the intersection of philosophy and finance, introducing
new notions of price and market. Inverting the received view, he now sees a
creation of matter in both the market and its metaphysics, rather than pure
speculation.

Once recognized as the proper medium of
contingency and disassociated from the probabilistic and statistical tools
traditionally used to model it, the market can be thought as 'real', in a
new sense of reality corresponding to the new sense of matter. To bring this new
and original perspective, The Medium of Contingency builds on probability
theory as first formalized by von Mises and Kolmogorov, and later revisited by
Shafer and Vovk. It utilises the author's extensive experience in derivatives
pricing technology and software, as well as his work in the philosophy of
contingency and contingent claims, to propose a new philosophical
interpretation of Brownian motion and of the Black-Scholes-Merton formula. Then
it completes the overturning of the traditional view of the market by arguing
that there should be no difference, ultimately, between an underlying asset and
the derivative written on it.

This book does not aim to change the market but the way we must think of it. It
is the author's conviction that there can be no philosophy of the market, and
consequently no thinking of it, without a philosophy of contingent claims and
of derivative pricing. The book provides the missing piece, which the
philosophy of probability cannot provide alone. Its scope, however, extends
beyond the strict critique of financial mathematics, as it also, and perhaps
most importantly, delivers the author's definitive treatment of the
philosophically prominent and recently much discussed notion of contingency.
Preface

Introduction

0.1 Derivative Valuation Theory vs. Derivative Pricing Technology
0.2 Implied Volatility vs. Real Volatility
0.3 Formal Reality vs. Physical Reality

I The Matter

1 The End of Probability
1.1 The Void of Possibilities
1.2 A New Matter
1.3 The Infinity of Markets
1.4 The End of Statistics

2 The Vision Ahead
2.1 Regime-Switching Model
2.2 Recalibration
2.3 Is Probability Necessary?
2.4 Price and Probability
2.5 A New Metaphysics
2.6 Absolute Contingency
2.7 The Market as an Opportunity for Speculative Thought
2.8 The Market as the Conversion of the Image of Thought
2.9 Ascending to the Metalogical Level

3 Introducing the Market
3.1 The Unexchangeable Place of Exchange
3.1.1 The market as a continual event
3.1.2 The market as quantitative history
3.1.3 The intensive nontemporal price process
3.1.4 The continuity of the discontinuity
3.1.5 The matter beyond antifragility
3.2 The Medium of Contingency
3.2.1 The technology of the future
3.2.2 The book behind the market
3.3 Pricing vs. Valuation
3.3.1 The surface of the market
3.3.2 The smile problem
3.3.3 The absolute local
3.3.4 In the middle of the event

4 The Thought Behind
4.1 Two Sides of Writing
4.2 Genesis of Price vs. Generation of Number
4.3 The Market as Geometry
4.4 State vs. Mark
4.5 Probability as an Internal Episode
4.6 The Alternative Axiomatic System of Shafer and Vovk
4.7 Extensive Difference vs. Intensive Difference

II The Matter in Brownian Motion

5 From Throwing the Dice to Grasping Brownian Motion
5.1 The Meaning of Probability
5.1.1 The Law of Large Numbers
5.1.2 Intuition
5.1.3 Matter
5.1.4 Reality
5.1.5 Tense
5.2 Changing the Meaning of Matter
5.2.1 Money
5.2.2 Time is not money
5.2.3 Money is place
5.3 Changing the Meaning of Reality
5.3.1 Ex-ante vs. ex-post
5.3.2 Brownian motion

6 From the Marvel of Brownian Motion to the Reality of the Market
6.1 The Technology of the Market
6.2 The Reality of the Market
6.3 The Market as an Inverted Order of Thought

III The Matter in Contingency

7 The Paper and the Tree
7.1 The Market and Time
7.1.1 Contingency, writing and exchanging
7.1.2 Price and time
7.1.3 Price and the event
7.1.4 Price and the trace
7.2 From the Mark to the Whole Market
7.2.1 Contingent payoff vs. contingent claim (first take)
7.2.2 The invention of writing (first take)
7.2.3 The exchange and the abyss

8 Archaeology of the Multiple
8.1 To Be vs. Can Be
8.1.1 Identification and transition
8.1.2 The danger of abstraction and the suspension of possibility
8.1.3 0 and 1
8.1.4 The real future
8.2 Chrono-logic
8.2.1 Probability as an integral
8.2.2 Chronology as a simulation of chrono-logic
8.3 Accounting for the Event
8.3.1 Money and the other face of the event
8.3.2 The accident of time and the necessity of work
8.3.3 An event that is not but that remains
8.3.4 Writing the event

9 Archaeology of the Exchange
9.1 All of the Market!
9.1.1 Impossible exchange, necessary exchange
9.1.2 The inverse view
9.2 Statistics as a Proto-market
9.2.1 Abstraction and the precision of the present state
9.2.2 The immanence of statistics and the immanence of the paper
9.2.3 The matter in statistics
9.3 The Matter in the Exchange
9.3.1 The non-individual singular
9.3.2 Single-case statistics
9.3.3 Contingency of the strike

10 Matter and Geometry
10.1 The Singularity of Writing
10.2 The Singularity of the Exchange

IV The Market of Contingent Claims (or the Matter in Black-
Scholes-Merton)

11 Towards a Contemporary Theory of the Market
11.1 The Stochastic Narrative of the Market
11.1.1 Definite states
11.1.2 Derivatives prices as states
11.1.3 Variations on lottery value and random price
11.1.4 The curse of the derivative value
11.2 The Trading Narrative of the Market
11.2.1 Can the derivative trade independently?

12 Incomplete Markets
12.1 Complete vs. Incomplete Markets
12.2 Martingale Measure of the Market
12.3 Equivocation
12.4 Incomplete Market when the market Is All There Is

13 The Central Knot
13.1 Contingent Payoff vs. Contingent Claim
13.2 Probabilistic Exit
13.3 The Alternative Exit
13.3.1 Differentiating the form
13.4 The Invention of Writing
13.5 Genesis
13.5.1 That they don't exist

14 The Hard Problem
14.1 The Ultimate Probability Spot
14.2 The Presentation of the Contingent Payoffs
14.3 The Lure of Theory
14.4 The Semantic Theory of the Market

15 The Book of the Market
15.1 Formalism and Meta-formalism
15.1.1 The instant of the formalism and the instant of the market
15.1.2 The infinity of the option price and the infinity of matter
15.1.3 Formal deduction of matter
15.1.4 A new book for a new reality
15.2 The Book of Genesis
15.2.1 Only the book can write history
15.2.2 One book instead of two theories
15.2.3 Only the book can bind the void
15.2.4 Only the book can settle the succession
15.2.5 Contemporary art
15.2.6 An ontology made of paper
15.3 The Trading Force
15.4 Coda

16 Denouement: The theory after the Two Narratives

Conclusion
17 Appendix 1: Regime-Switching Model 669
17.1 A Meta-contextual Pricing Tool
17.2 Recalibration

18 Append
In The Medium ofContingency Elie Ayache builds upon his ground-breaking book The Blank
Swan, in exploring the intersection of philosophy and finance, introducing
new notions of price and market. Inverting the received view, he now sees a
creation of matter in both the market and its metaphysics, rather than pure
speculation.



Once recognized as the proper medium of
contingency and disassociated from the probabilistic and statistical tools
traditionally used to model it, the market can be thought as 'real', in a
new sense of reality corresponding to the new sense of matter. To bring this new
and original perspective, The Medium of Contingency builds on probability
theory as first formalized by von Mises and Kolmogorov, and later revisited by
Shafer and Vovk. It utilises the author's extensive experience in derivatives
pricing technology and software, as well as his work in the philosophy of
contingency and contingent claims, to propose a new philosophical
interpretation of Brownian motion and of the Black-Scholes-Merton formula. Then
it completes the overturning of the traditional view of the market by arguing
that there should be no difference, ultimately, between an underlying asset and
the derivative written on it.

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