The Blank Swan: The End of Probability (Google eBook)

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John Wiley & Sons, May 5, 2010 - Business & Economics - 496 pages
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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.

In this revolutionary book, Elie redefines the components of the technology needed to price and trade derivatives. Most importantly, and drawing on a long tradition of philosophy of the event from Henri Bergson to Gilles Deleuze, to Alain Badiou, and on a recent brand of philosophy of contingency, embodied by the speculative materialism of Quentin Meillassoux, Elie redefines the market itself against the common perceptions of orthodox financial theory, general equilibrium theory and the sociology of finance.

This book will change the way that we think about derivatives and approach the market. If anything derivatives should be renamed contingent claims, where contingency is now absolute and no longer derivative, and the market is just its medium. The book also establishes the missing link between quantitative modelling (no longer dependent on probability theory but on a novel brand of mathematics which Elie calls the mathematics of price) and the reality of the market.

  

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Review: The Blank Swan: The End of Probability

User Review  - Bernd - Goodreads

completely inaccessible and inconsistent ramblings, riding on the popularity off Taleb's "Black Swan" publication Read full review

Contents

Introduction
xv
WRITING AND EVENT
1
Writer of The BLANK Swan
3
The Writing of Derivatives
31
The Event of the Market
61
Writing and the Market
87
ABSOLUTE CONTINGENCY AND THE RETURN OF SPECULATION
123
The Necessity of Contingency
125
The Mathematics of Price
197
Barton Fink
217
The Narrative Adventure
237
Out of the Box
253
The Prestige
283
The Geographical Process
305
CONVERSION OF CREDIT INTO EQUITY OR THE GENESIS OF THE MARKET
341
History of the Market
343

Passage to the Future
143
Necessity of the Future
163
Necessity of Writing
177
FLIGHT TO SYDNEY OR THE GENESIS OF THE BOOK
195
From Debt to Equity
365
The Market and the Philosophy of Difference
385
Future of the Market
415
Copyright

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About the author (2010)

Elie Ayache was born in Lebanon in 1966. Trained as an engineer at l’École Polytechnique of Paris, he pursued a career of option market-maker on the floor of MATIF (1987-1990) and LiFFE (1990-1995). He then turned to the philosophy of probability (DEA at la Sorbonne) and to derivative pricing, and co-founded of ITO 33, a financial software company, in 1999. Today, ITO 33 is the leading specialist in the pricing of convertible bonds, in the equity-to-credit problem, and more generally, in the calibration and recalibration of volatility surfaces. Elie has published many articles in the philosophy of contingent claims, as well as a book, dedicated to the philosophy of writing.

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