A pricing model runs inside the exchange’s automated trading machinery.

Evidence

Dotted inconspicuously among all this automation are the touch screens used to set Autoquote working. Once these screens have been used to set parameters such as volatility, Autoquote receives stock prices and index levels from other markets and, as these inputs change, continuously updates option prices. Two words at the top of each screen reveal how it is done: “Cox-Ross.” The Cox-Ross-Rubinstein model (similar to Black- Scholes-Merton but more flexible and in many cases computationally more tractable) is used to generate prices. Human beings remain in ultimate command: by pressing on the section of screen marked “lean,” traders can manually override model values, and, furthermore, the ebb and flow of orders in actively traded option classes do move prices. Nevertheless, such human interaction is now merely one aspect of a larger technosystem. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 135

Categorization

• XREF: This is the concrete institutional detail that anchors the performativity thesis — the model literally running on screens inside the machine. Connects directly to the MacKenzie/Millo project the reader is studying. — connects to: Financialization includes automated high-frequency trading where computers execute most exchanges — Max Haiven, Cultures of Financialization, 71; Markets carry explicit traces of the specific pricing models they use — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 899; Traders’ arbitrage activity made the pricing model appear empirically true — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 126 (+1 more)

Related

• Markets carry explicit traces of the specific pricing models they use (similarity 0.93)
• By 2000 automated quoting generated prices for options with near-zero actual trading (similarity 0.85)
• The CBOE automated away the missing stock price by calculating a synthetic underlying. (similarity 0.80)
• Option pricing theory did not describe markets but remade them in its own image (similarity 0.79)
• Implied volatility concepts and calculation devices are constitutive of economic action (similarity 0.78)
• Traders using the pricing model actively made market prices conform to the model (similarity 0.78)

Broader Connections

• Markets carry explicit traces of the specific pricing models they use #expands (0.90) — Donald MacKenzie, An Engine, Not a Camera, 899
• Financialization includes automated high-frequency trading where computers execute most exchanges #expands (0.85) — Max Haiven, Cultures of Financialization, 71
• By 2000 automated quoting generated prices for options with near-zero actual trading #exemplifies (0.85) — Donald MacKenzie, An Engine, Not a Camera, 896
• Traders’ arbitrage activity made the pricing model appear empirically true #exemplifies (0.80) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 126