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arxiv: cond-mat/9609172 · v2 · submitted 1996-09-18 · ❄️ cond-mat

Financial markets as adaptative ecosystems

classification ❄️ cond-mat
keywords marketmarketsfinancialfluctuationsaccountadaptativeadaptivealthough
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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.

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