 Incomplete MarketsElie Ayache Chapter 12 in The Medium of Contingency, 2015, pp 267-282 from Palgrave Macmillan Abstract: Abstract The first marvel that the market came up with against probability is the trading of the underlying asset itself. The exchange is an extraordinary matter, which is not yet fully investigated according to us. It is not that something is random (a lottery) and then we seek its value and its price. The price is there already and it cannot be anything but random because it changes. It changes because there is the minimum assumption in the market that a transaction will be followed by the next (there is, thus, the assumption of time) and that, at the next step, either the buyer or the seller is not satisfied (while his counterparty is) and will be prepared to drag the price either up or down. There is no time to try and guess or predict the next price movement in the market, because it is the exchange and trading that we are talking about and any future predictable price will trade as of now (EMH). The exchange, left to its own forces and own logic, seems thus to overturn the relation of antecedence between action and prediction. Keywords: Brownian Motion; Option Price; Stochastic Volatility; Price Process; Underlying Process (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-28656-7_13 Ordering information: This item can be ordered from DOI: 10.1007/978-1-137-28656-7_13 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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