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Neither one of them should be on there. Both rest upon the false assumption of human rationality. They are delusions masquerading as mathematical truth.
by aswanson 13y ago
Neither one of them should be on there. Both rest upon the false assumption of human rationality. They are delusions masquerading as mathematical truth.
- consz 13y agoBlack Scholes doesn't assume rational market participants.
- justincormack 13y agoIt does make other bogus assumptions though. Normal distributions, risk free interest rates,...
- wreegab 13y agoI thought the problem with Black-Scholes is that it didn't factor in the use of Black-Scholes by participants.
- igravious 13y agoThat's an interesting perspective. And it's a perspective that would be familiar to any student of cybernetics and social systems theory: http://en.wikipedia.org/wiki/Second-order_cybernetics http://en.wikipedia.org/wiki/Second-order_cybernetics so-called second order cybernetics. Fascinating stuff I think.