Book description
October 19
th
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.
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.
