Epstein Secrets

andom walk process has been removed from it's many body background, and individual prices are treated as moving randomly isolated by themselves. But Black-Scholes is simply the diffusion equation, and things don't diffuse with random jumps in a vacuum. The random movements of dust particles undergoing Brownia

that this chaotic motion is noticeable in objects as large as planets. This is not simply the chaos of quantum effects or the stochasticity found in Black-Scholes. This is 'deterministic chaos' or usually 'chaos theory'. The chaos is present even in problems that can be described in exact mathematics and are

classical economics becomes a much more powerful theoretical method than neoclassicism. The economic historians such as Reinhart & Rogoff, Shiller, Smithers, Harrison, Napier and Bernholz have the advantage of the long sweep of history to prevent them from accepting high- faluting theory that disagrees w

The research on liquidity suggests two implications for finance that are both quite profound, the first area relates to the pricing models based on Black-Scholes, the second to the pricing of shares under the CAPM. Almost all modern option pricing theory is based on the Black-Scholes model, or other closely-

sible), then it may be that measurement of liquidity might be able to give good timely measures for current volatility that can be used directly in Black-Scholes models; rather than the current practice of imputing from historical volatility. A second significant area of interest for the application of liqui

model. This then becomes much more significant at the level of the whole stockmarket, especially in the light of the extensive work by Shiller and Smithers regarding the long-term valuation of stock markets. This work is very well summed up in 'Wall Street Revalued' [Smithers 2009]. The central thesis

ists working in finance have not only accepted this, but they have built more and more baroque models on these flimsy foundations. The trouble with Black-Scholes is that it works very well, except when it doesn't. This basic flaw has been pointed out from Mandlebrot onwards, to date with no notice taken. Thi

nomists. These ideas include recent research in market microstructure, liquidity, post-Keynesian pricing theory as well as the work of Foley, Keen, Smithers, Shiller, Cooper, Pettis, Pepper & Oliver, Mehrling, Lyons and others. Neoclassical economics, while forming an intellectually beautiful framework,