Post-crash repairs aimed to recreate the idealized Black-Scholes pricing world.

Evidence

Sunshine trading could, in other words, be seen as an attempt to reconstruct a Black-Scholes world, to recreate a world in which the mere placing of “informationless” orders did not affect prices. — Donald MacKenzie, An Engine, Not a Camera, 884

Categorization

• DEFINE: Lays out the core performative ideal of a ‘Black-Scholes world’—a world where trading the model’s prescribed portfolio does not disturb price.
• DEEPTHINKING: Distils the entire performativity thesis into one sentence: market repairs are attempts to remake reality so that economic models describe it truly.
• XREF: connects to: The Black-Scholes methodology reshaped economists’ and regulators’ thinking beyond derivatives. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 99; The 1987 crash permanently broke Black-Scholes fit with market prices — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 150; The 1987 crash ended the Black-Scholes model’s empirical fit for good — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 904 (+7 more)

Broader Connections

• The 1987 crash permanently broke Black-Scholes fit with market prices #qualifies (0.85) — Donald MacKenzie, An Engine, Not a Camera, 150
• The 1987 crash ended the Black-Scholes model’s empirical fit for good #qualifies (0.85) — Donald MacKenzie, An Engine, Not a Camera, 904
• The October 1987 crash ended the flat volatility curve predicted by Black-Scholes #qualifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 900
• The 1987 crash ended the Barnesian performativity of classic option-pricing theory #qualifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 942
• Post-1987 option pricing may be rational given the crash’s trauma, not irrational. #expands (0.75) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 155
• The 1987 crash exposed limits of arbitrage as a mechanism linking markets #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 822
• The arbitrage argument produces the Black-Scholes partial differential equation. #corroborates (0.75) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 95
• The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. #corroborates (0.72)
• Black and Scholes succeeded by proving their formula solved a theoretically justified differential equation #corroborates (0.70) — Donald MacKenzie, An Engine, Not a Camera, 584