Fairer option pricing let 1970s exchanges prosper where predecessors failed

Evidence

Keenly priced options in their turn helped the new U.S. options exchanges of the 1970s to grow, to prosper, and to become more efficient, rather than to falter as their predecessors had. Since the Black-Scholes-Merton analysis posits a liquid, zero-transaction-cost options market, this would again be an effect of the model that was performative in the Barnesian sense. — Donald MacKenzie, An Engine, Not a Camera, 1158

Categorization

• XREF: Direct instantiates the Barnesian performativity concept (see chapter 1 of this book) and contrasts with counterperformativity discussed later in the book. — connects to: Pre-1970s options were stigmatized as speculation and market manipulation tools. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 523; The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling.; Efficient-markets and random-walk theory legitimized options against their scandalous reputation. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62 (+1 more)

Broader Connections

• The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. #expands (0.75)
• Efficient-markets and random-walk theory legitimized options against their scandalous reputation. #expands (0.75) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62