Is Economics Performative? Option Theory and the Construction of Derivatives Markets

Do Economists Make Markets?: On the Performativity of Economics

Volumn , Issue , 2020, Pages 54-86

  Mackenzie, Donald ^a  

^a UNIVERSITY OF EDINBURGH   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 85194305015     PISSN: None     EISSN: None     Source Type: Book    
DOI: None     Document Type: Chapter

References (61)

1. Austin, J. L. 1962. How to Do Things with Words. Oxford: Clarendon.
2. Austin, J. L. 1970. Philosophical Papers. 2nd ed. Oxford: Clarendon.
3. Bachelier, L. 1900. “Théorie de la spéculation.” Annales de l’Ecole Normale Supérieure, third series 17:22–86.
4. Barnes, B. 1983. “Social Life as Bootstrapped Induction.” Sociology 17: 524–545.
5. Barnes, B. 1988. The Nature of Power. Cambridge: Polity.
6. Bernstein, P. L. 1992. Capital Ideas: The Improbable Origins of Modern Wall Street. New York: Free Press.
7. Black, F. 1975a. “Fact and Fantasy in the Use of Options.” Financial Analysts Journal 31:36–41, 61–72.
8. Black, F. 1975b. “The Option Service: An Introduction.” Personal papers of Mark Rubinstein.
9. Black, F. 1988. “The Holes in Black-Scholes.” Risk 1/4 (March):30–32.
10. Black, F., and M. Scholes. 1972. “The Valuation of Option Contracts and a Test of Market Efficiency.” Journal of Finance 27:399–417.
11. Black, F., and M. Scholes. 1973. “The Pricing of Options and Corporate Liabilities.” Journal of Political Economy 81:637–654.
12. Bourdieu, P. 1991. Language and Symbolic Power. Cambridge: Polity.
13. Brady Commission. 1988. Report of the Presidential Task Force on Market Mechanisms. Washington, DC: U.S. Government Printing Office.
14. Bronzin, V. 1908. Theorie der Prämiengeschäfte. Leipzig: Franz Deuticke.
15. Callon, M., Ed. 1998. The Laws of the Markets. Oxford: Blackwell.
16. Callon, M., and F. Muniesa. 2003. “Les marchés économiques comme dispositifs collectifs de calcul.” Réseaux 122:189–233.
17. Cox, J. C., and M. Rubinstein. 1985. Options Markets. Englewood Cliffs, NJ: Prentice Hall.
18. Cox, J. C., S. A. Ross, and M. Rubinstein. 1979. “Option Pricing: A Simplified Approach.” Journal of Financial Economics 7:229–263.
19. Faulhaber, G. L., and W. J. Baumol. 1988. “Economists as Innovators: Practical Products of Theoretical Research.” Journal of Economic Literature 26: 577–600.
20. Galai, D. 1977. “Tests of Market Efficiency of the Chicago Board Options Exchange.” Journal of Business 50:167–197.
21. Gastineau, G. L. 1975. The Stock Options Manual. New York: McGraw-Hill.
22. Gastineau, G. L. 1979. The Stock Options Manual. 2nd ed. New York: McGraw-Hill.
23. Hull, J. C. 2000. Options, Futures, & Other Derivatives. Upper Saddle River, NJ: Prentice Hall.
24. Hutchins, E. 1995a. Cognition in the Wild. Cambridge, MA: MIT Press.
25. Hutchins, E. 1995b. “How a Cockpit Remembers Its Speeds.” Cognitive Science 19:265–288.
26. Jackwerth, J. C. 2000. “Recovering Risk Aversion from Option Prices and Realized Returns.” Review of Financial Studies 13:433–451.
27. Jackwerth, J. C., and M. Rubinstein. 1996. “Recovering Probability Distributions from Option Prices.” Journal of Finance 51:1611–1631.
28. Kairys, J. P., Jr., and N. Valerio III. 1997. “The Market for Equity Options in the 1870s.” Journal of Finance 52:1707–1723.
29. Kassouf, S. T. 1965. A Theory and an Econometric Model for Common Stock Purchase Warrants. Brooklyn, NY: Analytical Publishers.
30. Krishna, D. 1971. “‘The Self-Fulfilling Prophecy’ and the Nature of Society.” American Sociological Review 36:1104–1107.
31. Latour, B. 1999. Pandora’s Hope: Essays on the Reality of Science Studies. Cambridge, MA: Harvard University Press.
32. MacKenzie, D. 2001. “Physics and Finance: S-Terms and Modern Finance as a Topic for Science Studies.” Science, Technology, & Human Values 26: 115–144.
33. MacKenzie, D. 2003. “An Equation and Its Worlds: Bricolage, Exemplars, Disunity and Performativity in Financial Economics.” Social Studies of Science 33:831–868.
34. MacKenzie, D. 2004. “The Big, Bad Wolf and the Rational Market: Portfolio Insurance, the 1987 Crash and the Performativity of Economics.” Economy and Society 33:303–334.
35. MacKenzie, D. 2006. An Engine, Not a Camera: How Financial Models Shape Markets. Cambridge, MA: MIT Press.
36. MacKenzie, D., and Y. Millo. 2003. “Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange.” American Journal of Sociology 109:107–145.
37. McGinty, L., E. Beinstein, R. Ahluwalia, and M. Watts. 2004. Credit Correlation: A Guide. London: JP Morgan. Available at http://www.math.nyu.edu/~cousot/Teaching/IRCM/Lecture10/Base%20correlationJPM.pdf, accessed June 24, 2006.
38. Mehrling, P. 2005. Fischer Black and the Revolutionary Idea of Finance. New York: Wiley.
39. Merton, R. C. 1973. “Theory of Rational Option Pricing.” Bell Journal of Economics and Management Science 4:141–183.
40. Merton, R. C. 1976. “Option Pricing when Underlying Stock Returns Are Discontinuous.” Journal of Financial Economics 3:125–144.
41. Merton, R. C., and Z. Bodie. 2005. “Design of Financial Systems: Towards a Synthesis of Function and Structure.” Journal of Investment Management 3:1–23.
42. Merton, R. K. 1948. “The Self-Fulfilling Prophecy.” Antioch Review 8:193–210.
43. Millo, Y. 2003. “Where Do Financial Markets Come From? Historical Sociology of Financial Derivatives Markets.” PhD diss. University of Edinburgh.
44. Mirowski, P. 1995. “Mandelbrot’s Economics after a Quarter Century.” Fractals 3:581–600.
45. Mixon, S. 2006. “Option Markets and Implied Volatility: Past versus Present.” Available at http://ssrn.com/abstract=889543, accessed June 24, 2006.
46. Moore, L. and S. Juh. Forthcoming. “Derivative Pricing 60 Years Before Black- Scholes: Evidence from the Johannesburg Stock Exchange,” accepted for publication in Journal of Finance. Available at http://www.afajof.org/journal/forth_abstract.asp?ref=280, accessed June 24, 2006.
47. Parkinson, M. 1977. “Option Pricing: The American Put.” Journal of Business 50:21–36.
48. Passell, P. 1997. “2 Get Nobel for a Formula at the Heart of Options Trading.” New York Times, October 15:D1, D4.
49. Ross, S. A. 1987. “Finance.” Pp. 322–336 in The New Palgrave Dictionary of Economics, vol. 2, edited by J. Eatwell, M. Milgate, and P. Newman. London: Macmillan.
50. Rubinstein, M. 1985. “Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 through August 31, 1978.” Journal of Finance 40:455–480.
51. Rubinstein, M. 1994. “Implied Binomial Trees.” Journal of Finance 49: 771–818.
52. Scholes, M. S. 1998. “Derivatives in a Dynamic Environment.” Pp. 475–502 in Les Prix Nobel 1997. Stockholm: Almqvist & Wiksell.
53. Searle, J. R. 1996. The Construction of Social Reality. London: Penguin.
54. Seligman, J. 1982. The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance. Boston: Houghton Mifflin.
55. Swensen, D. F. 2000. Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment. New York: Free Press.
56. Taleb, N. 1998. “How the Ought Became the Is.” Futures & OTC World Black-Scholes-Merton Supplement:35–36.
57. Thorp, E. O., and S. T. Kassouf. 1967. Beat the Market: A Scientific Stock Market System. New York: Random House.
58. Wellemeyer, M. 1973. “The Value in Options.” Fortune 88/5 (November): 89–96.
59. Whitley, R. 1986a. “The Rise of Modern Finance Theory: Its Characteristics as a Scientific Field and Connections to the Changing Structure of Capital Markets.” Research in the History of Economic Thought and Methodology 4: 147–178.
60. Whitley, R. 1986b. “The Transformation of Business Finance into Financial Economics: The Roles of Academic Expansion and Changes in U.S. Capital Markets.” Accounting, Organizations and Society 11:171–192.
61. Zimmermann, H., and W. Hafner. 2004. “Amazing Discovery: Professor Bronzin’s Option Pricing Models (1908).” Available at http://www.wwz.uni- bas.ch/finance/publications/2004.html, accessed June 24, 2006.