Volume 41, Number 3, february I 1998
|Page(s)||239 - 244|
|Published online||01 September 2002|
Financial markets as adaptive systems
Finance, 109-111 rue Victor Hugo,
92532 Levallois Cedex,
2 Service de Physique de l'État Condensé, Centre d'études de Saclay, Orme des Merisiers, 91191 Gif-sur-Yvette Cedex, France
3 Laboratoire de Physique de la Matière Condensée CNRS URA 190, Université de Nice, Sophia Antipolis B.P. 70, 06108 Nice, France
Accepted: 3 December 1997
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset fluctuations: “fat tails” and correlations in the scale of fluctuations. These aspects, although not included in the pricing models, are very precisely reflected in the price fixed by the market as a whole. Financial markets thus behave as rather efficient adaptive systems.
PACS: 02.50.-r – Probability theory, stochastic processes, and statistics / 05.40.+j – Fluctuation phenomena, random processes, and Brownian motion / 89.90.+n – Other areas of general interest to physicists
© EDP Sciences, 1998
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