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Article overview
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Financial markets as adaptative ecosystems | | Marc Potters
; Rama Cont
; Jean-Philippe Bouchaud
; | | Date: |
18 Sep 1996 | | Subject: | cond-mat | | Affiliation: | 1,3) and Jean-Philippe Bouchaud (2,1) ( Science & Finance CEA Saclay Universite de Nice | | Abstract: | We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset fluctuations: `fat tails’ and correlations in the scale of fluctuations. These aspects, although not included in the pricing models, are very precisely reflected in the price fixed by the market as a whole. Financial markets thus behave as rather efficient adaptive systems. | | Source: | arXiv, cond-mat/9609172 | | Services: | Forum | Review | PDF | Favorites | |
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