As promised and posted in my blog. I will watch this thread, but henceforth, I will only be posting there, rather than perpetual beta replication. trackstar's blog trackstar's blog - August 18The Blank Swan - Ripples in the Market Stream"October 19th 1987 was a day of huge change for the global finance industry. On this day the stock 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 a model for this event, and ways to simulate it in order 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, or even to a random generator, that can then be reproduced or represented in a theoretical framework.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 alike -, i.e. the very category of prediction."- From the description of The Blank Swan from Wiley**People are curious about this book, Here and There, and now that I have ascertained that it is indeed a Blank Swan, not a Black One, I thought that I would share some observations with you. I have been reading, stopping, rereading, and travelling along several pathways in learning and understanding Elie's concepts and arguments this summer. It is a dense, tough, and I would say brilliant piece of work, and I recommend the book highly, if you are the type of reader who makes a commitment and follows through. If you are only interested in how to get rich trading vol and you need someone else's answers *right now*, then perhaps you should go back to your blue screen with your blank stare. Elie offers us some very interesting signals, but we will have to develop the trading strategies ourselves. ***Let's start with Elie's own description of the work, so we are not entering the realm of second-order implied philosophy quite so quickly. "The current crisis has led us to a conceptual impasse regarding the financial market. No prediction model can apply to the market, (Taleb), would say, and derivatives, which are the product of the most sophisticated brand of financial mathematics and engineering, should be banned. I claim that the way of the market falls outside probability and prediction, and for this reason it should be preserved.Probability has to be discarded and a new category has to emerge instead, which will mediate contingency. This new category is something called "price." While probability mediates abstract possibilities, or pure metaphysical fictions, price mediates concrete and real contingencies, which typically take place in a market.Philosophers and financial academics alike seem to be missing the point. Philosophers of contingency and the event are for the most part of leftist obedience. They believe that the crisis signals the end of capitalism and Wall Street. In fact, the market has nothing to do with Wall Street or with the investment banks. Market-making is a creative activity. The market is a category of thought that is independent of ideology. It replaces probability altogether and discarding the market, like the philosophers of radical change claim we should do, is like discarding probability!As for financial academics, they aren't in the least interested in learning about the onto-genesis of the market, or the very investigation that I have attempted in this book. They deal with prices and values as if they were numbers and mathematical functions. How can they listen to someone who claims that the price only looks like a number but doesn't "compute" like one and that one needs to very carefully examine a long thread of philosophy of the event and of contingency, extending from Bergson to Deleuze to Badiou and Meillassoux, in order to understand what's inside a price ?"**There is fairly strong consensus around Wilmott on the shortcomings of the financial academics, so let's dig a little deeper into the Geneaology of Elie's Morals. In addition to the philosophers that he has mentioned above, I will include others that have received significant attention in the book. In some cases, I have substantial familiarity (Deleuze, Guattari, Derrida) and others were new to me (I had not heard of Meillassoux and had minimal contact with Badiou, until now). Continental philosophy is undergoing yet another revolution and unless you suivez la piste de philosophie directement en France, it can be years before some of the best work is translated and reaches the Anglophone audience. Rather than a formal book review, I will offer signs and guideposts. This will be more helpful to those interested in the book, I think, and will prevent the proliferation of flawed derivatives. When a philosopher has passed on to the next world, we have only our own minds and perhaps a selection of dedicated experts to rely on for interpretation. But Elie is very much alive and hopefully he will visit this thread, if and when there are serious questions and comments. "(The) simplest ideas are sometimes the most revolutionary and, consequently, the most difficult ones. Here is the simple idea that my whole book revolves around: If contingency is truly to be considered absolute (Meillassoux), then it should no longer be thought in terms of possibilities; what, in probability theory, we call "states of the world," or in metaphysics, "possible worlds". It should be thought absolutely, independently of any "system of coordinates" represented in possibility."**So, on to some contingencies, with my Being, in Time. - TS
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on August 17th, 2010, 10:00 pm, edited 1 time in total.