In The Medium of
Contingency Elie Ayache builds upon his ground-breaking book The Blank
Swan, in exploring the intersection of philosophy and finance, introducing
new notions of price and market. Inverting the received view, he now sees a
creation of matter in both the market and its metaphysics, rather than pure
speculation.
Once recognized as the proper medium of
contingency and disassociated from the probabilistic and statistical tools
traditionally used to model it, the market can be thought as 'real', in a
new sense of reality corresponding to the new sense of matter. To bring this new
and original perspective, The Medium of Contingency builds on probability
theory as first formalized by von Mises and Kolmogorov, and later revisited by
Shafer and Vovk. It utilises the author's extensive experience in derivatives
pricing technology and software, as well as his work in the philosophy of
contingency and contingent claims, to propose a new philosophical
interpretation of Brownian motion and of the Black-Scholes-Merton formula. Then
it completes the overturning of the traditional view of the market by arguing
that there should be no difference, ultimately, between an underlying asset and
the derivative written on it.
This book does not aim to change the market but the way we must think of it. It
is the author's conviction that there can be no philosophy of the market, and
consequently no thinking of it, without a philosophy of contingent claims and
of derivative pricing. The book provides the missing piece, which the
philosophy of probability cannot provide alone. Its scope, however, extends
beyond the strict critique of financial mathematics, as it also, and perhaps
most importantly, delivers the author's definitive treatment of the
philosophically prominent and recently much discussed notion of contingency.
