Modern options pricing derives from arbitrage logic, not directional beliefs.

Evidence

In modern option theory, the price of options is seen as determined by considerations of arbitrage, not by beliefs about whether stock prices will rise or fall. — Donald MacKenzie, An Engine, Not a Camera, 1454

Categorization

• DEFINE: Crisp statement of the paradigm shift that Black-Scholes built on: arbitrage pricing displacing subjective expectation.
• XREF: Core to the performativity thesis — this is the model ontology change the book documents. — connects to: Option prices are set entirely by arbitrage, independent of risk attitudes or probabilities — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 608; Options can be synthetically manufactured by shifting between stocks and cash as prices move. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 793; Constrained arbitrage allows finance-theory models to diverge from actual prices. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1213 (+5 more)

Broader Connections

• Risk-neutral valuation yields the identical option price as arbitrage arguments #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1285
• Market practitioners mean pricing discrepancies, not riskless profit, by arbitrage #qualifies (0.82) — Donald MacKenzie, An Engine, Not a Camera, 947
• Derivatives do not reflect risk but actively produce contingencies and value #complicates (0.75) — Aris Komporozos-Athanasiou, Speculative Communities, 390
• Option pricing theory did not describe markets but remade them in its own image #expands (0.72) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 182