Option pricing theory serves as the test case for performativity.

Evidence

Indeed, the core of the book-chapters 5, 6, and 7 -is in a sense a single, extended case study of the development of option theory, of its impact on markets, and of the empirical history of option pricing. — Donald MacKenzie, An Engine, Not a Camera, 124

Categorization

• XREF: connects to: Financial valuation theory legitimizes financiers’ power by claiming they optimize resource allocation. — Ève Chiapello, Financialisation of Valuation, 36; Option pricing theory did not describe markets but remade them in its own image — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 182; The 1987 crash ended the Barnesian performativity of classic option-pricing theory — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 942 (+9 more)

Broader Connections

• Barnesian performativity means models create the price patterns they describe #expands (0.95) — Donald MacKenzie, An Engine, Not a Camera, 148
• Option pricing theory did not describe markets but remade them in its own image #expands (0.92) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 182
• Economic theory succeeded in derivatives markets partly by making markets conform to it #corroborates (0.90) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 9
• Option theory infrastructure allows derivatives markets to exist at current scale #expands (0.88) — Donald MacKenzie, An Engine, Not a Camera, 1138
• Arbitrage is the chief channel achieving Barnesian performativity in finance #expands (0.87) — Donald MacKenzie, An Engine, Not a Camera, 1209
• The 1987 crash ended the Barnesian performativity of classic option-pricing theory #qualifies (0.85) — Donald MacKenzie, An Engine, Not a Camera, 942
• The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. #expands (0.85)
• The skew’s persistence after 1987 undermines the discovery narrative of option pricing #qualifies (0.83) — Donald MacKenzie, An Engine, Not a Camera, 1163
• Gradual market learning is the rival explanation to performativity #responds-to (0.82) — Donald MacKenzie, An Engine, Not a Camera, 149
• Efficient-markets and random-walk theory legitimized options against their scandalous reputation. #expands (0.78) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62
• Option pricing theory developed as Kuhn-style normal science elaborating the random-walk model #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 532