The Medium of Contingency

In The Medium ofContingency Elie Ayache builds upon his ground-breaking book The BlankSwan, in exploring the intersection of philosophy and finance, introducingnew notions of price and market. Inverting the received view, he now sees acreation of matter in both the market and its metaphysics, rather than purespeculation. Once recognized as the proper medium ofcontingency and disassociated from the probabilistic and statistical toolstraditionally used to model it, the market can be thought as ‘real’, in anew sense of reality corresponding to the new sense of matter. To bring this newand original perspective, The Medium of Contingency builds on probabilitytheory as first formalized by von Mises and Kolmogorov, and later revisited byShafer and Vovk. It utilises the author’s extensive experience in derivativespricing technology and software, as well as his work in the philosophy ofcontingency and contingent claims, to propose a new philosophicalinterpretation of Brownian motion and of the Black-Scholes-Merton formula. Thenit completes the overturning of the traditional view of the market by arguingthat there should be no difference, ultimately, between an underlying asset andthe derivative written on it. This book does not aim to change the market but the way we must think of it. Itis the author’s conviction that there can be no philosophy of the market, andconsequently no thinking of it, without a philosophy of contingent claims andof derivative pricing. The book provides the missing piece, which thephilosophy of probability cannot provide alone. Its scope, however, extendsbeyond the strict critique of financial mathematics, as it also, and perhapsmost importantly, delivers the author’s definitive treatment of thephilosophically prominent and recently much discussed notion of contingency.