An Engine, Not a Camera: How Financial Models Shape Markets

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MacKenzie D. An Engine, Not a Camera: How Financial Models Shape Markets. Cambridge: MIT Press, 2006.

Acknowledgments	ix

1	Performing Theory?	1

2	Transforming Finance	37

3	Theory and Practice	69

4	Tests, Anomalies, and Monsters	89

5	Pricing Options	119

6	Pits, Bodies, and Theorems	143

7	The Fall	179

8	Arbitrage	211

9	Models and Markets	243

Appendix A	An Example of Modigliani and Miller's "Arbitrage Proof" of the Irrelevance of Capital Structure to Total Market Value	277

Appendix B	Lévy Distribution	279

Appendix C	Sprenkle's and Kassouf's Equations for Warrant Prices	281

Appendix D	The Black-Scholes Equation for a European Option on a Non-Dividend-Bearing Stock	283

Appendix E	Pricing Options in a Binomial World	285

Appendix F	Repo, Haircuts, and Reverse Repo	289

Appendix G	A Typical Swap-Spread Arbitrage Trade	291

Appendix H	List of Interviewees	293

	Glossary	297

	Notes	303

	Sources of Unpublished Documents	331

	References	333

	Series List	369

	Index	371