On Jul 29, 2012, at 12:33 PM, Michael Smith wrote: >>> in >>> 1970, there was almost no trading in financial derivatives such as >>> “futures.” By June of 2004, derivatives contracts totaling $273 >>> trillion were outstanding worldwide. MacKenzie suggests that this >>> growth could never have happened without the development of theories >>> that gave derivatives legitimacy and explained their complexities. > > This seems highly plausible. I wonder whether technology didn't > also play an enabling role, in the form of cheap CPU cycles and > powerful math modules? The perfect storm.
My first job out of college was working for a Bell Labs physicist who'd left the field for Wall Street. His idea was to apply computer modeling to the pricing of listed options, which had just started trading. He'd do a run every morning via some timesharing arrangement with an MIT guy that identified under- and overpriced options using the Black-Scholes model (published in 1973). I used to hand-deliver some to clients around Wall Street, then come back and use my rudimentary Fortran skills to work on other pricing models. It was slow and very obscure. Almost no one listened to him - he had like 10 subscribers in 1975. Clearly, the ability to do that sort of thing in real time right at your desk has made an enormous difference - and now you don't even need human traders to enter the orders. Doug _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
