The Medium of Contingency ― An Inverse View of the Market

The Medium of Contingency brings a completely new and original perspective to the relationship between the reality of the marketplace and its disassociation with the probabilistic and statistical tools used to model and support it. It utlises the author's extensive experience and research in derivatives pricing, the analysis of the theory of contingent claims and philosophy, and builds on the work of thinkers such as von Mises, Kolmogorov, Shafer and Vovk. This book argues a new way of thinking about the mathematical applications of finance: that market is 'real' and relates to contingency, and yet has nothing to do with probability, when the latter is understood in its relation with statistics. Thus, a new appreciation of these relationships need to be developed to effectively apply them to the market.

This book provides original insight into the relationship between financial mathematics and financial markets, and provides new perspectives on the theory of derivatives pricing in the quantitative finance industry.

Elie Ayache (Paris, France) was born in Lebanon in 1966. Trained as an engineer at l'Ecole Polytechnique of Paris, he pursued a career of option market-maker on the floor of MATIF (1987-1990) and LIFFE (1990-1995). He then turned to the philosophy of probability (DEA at la Sorbonne) and to derivative pricing, and co-founded of ITO 33, a financial software company, in 1999. Today, ITO 33 is the leading specialist in the pricing of convertible bonds, in the equity-to-credit problem, and more generally, in the calibration and recalibration of volatility surfaces. Elie has published many articles on the philosophy of contingent claims, as well as The Blank Swan: The End of Probability.