An engine, not a camera : how financial models shape markets /
Donald MacKenzie.
- x, 377 pages : illustrations ; 24 cm.
- Inside technology .
- Inside technology. .
Includes bibliographical references and index.
Performing theory? -- Transforming finance -- Theory and practice -- Tests, anomalies, and monsters -- Pricing options -- Pits, bodies, and theorems -- The fall -- Arbitrage -- Models and markets -- An example of Modigliani and Miller's "Arbitrage proof" of the irrelevance structure to total market value -- Levy Distributions -- Sprenkle's and Kassouf's equations for warrant prices -- The Black-Scholes equation for a European option on a non-dividend-bearing stock -- Pricing options in a binomial world -- Repo, haircuts, and reverse repo -- A typical swap-spread arbitrage trade. 1. 2. 3. 4. 5. 6. 7. 8. 9. App. A. App. B. App. C. App. D. App. E. App. F. App. G.
"In An Engine, Not a Camera, Donald MacKenzie argues that the emergence of modern economic theories of finance affected financial markets in fundamental ways. These new, Nobel Prize-winning theories, based on elegant mathematical models of markets, were not simply external analyses but intrinsic parts of economic processes." "MacKenzie examines the role played by finance theory in the two most serious crises to hit the world's financial markets in recent years: the stock market crash of 1987 and the market turmoil that engulfed the hedge fund Long-Term Capital Management in 1998. He also looks at finance theory that is somewhat beyond the mainstream - chaos theorist Benoit Mandelbrot's model of "wild" randomness. MacKenzie's pioneering work in the social studies of finance will interest anyone who wants to understand how America's financial markets have grown into their current form."--BOOK JACKET.