Towards a Contemporary Theory of the Market

  • Elie Ayache


A market is all sorts of things and is composed of all sorts of people. Economies and histories create the market. Ideologies are for or against the market. Despite all their causes or their biographies, markets are ultimately down to prices, or even better, to changes of prices. There is one instance in which the market receives a precise definition, and this is when it is reduced to a stochastic process ruling the price of some traded asset. This is typically the starting point of derivative valuation theory, and this reduction of the market to a pure numerical process, which screens off the ‘real economy’ and represents the market purely in terms of statistical models and coefficients, has often been criticized.


Option Price Risk Preference Stochastic Volatility Implied Volatility Contingent Claim 


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  1. 1.
    Julian Barbour, The End of Time: The Next Revolution in Physics (Oxford: Oxford University Press, 1999).Google Scholar
  2. 2.
    See Rama Cont, Jose da Fonseca and Valdo Durrleman, Stochastic models of implied volatility surfaces, Economic Notes, 31 (2), 2002, 361–377.CrossRefGoogle Scholar

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© Elie Ayache 2015

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  • Elie Ayache

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