Wednesday, August 11, 2010

Ayache, The Blank Swan: The End of Probability

I suspect that there are only a handful of people in the world who are capable of fully understanding and appreciating Elie Ayache’s The Blank Swan: The End of Probability (Wiley, 2010). I admit up front that I am not one of them. Yes, I was trained as a philosopher and know more than the average bloke about option trading. If it weren’t summer I could even have both props recommended by Paul Wilmott for reading this book—a log fire and a large Scotch, “or probably several.” The problem is that the book takes the reader on an adventure down an often unnavigable rabbit hole and is written in language that, though clear on the surface, keeps wrapping around on itself. It is series of literary Möbius strips.

The philosophical underpinning for Ayache’s work comes from Quentin Meillassoux’s acclaimed effort to rescue metaphysics from dogmatic metaphysicians and the material world from the post-Kantian correlationists. (Meillassoux’s essay After Finitude: An Essay on the Necessity of Contingency was translated into English in 2008.) But Ayache radicalizes and some might argue trivializes Meillassoux’s philosophy: “…speculation shall from now on become absolutely nonmetaphysical, and by this I mean that it won’t even be about the physical world and its laws and that it won’t be concerned with possibilities and expectations any more. … my speculation will be absolute speculation, that is to say, speculation in the sense of financial markets.” (p. 162) He views derivative writing as an alternative to metaphysics. This strikes me as absolute hubris.

Ayache’s swan is blank because “the writing process and the pricing process are two special kinds of processes that do not take place in possibility or in probability, like the traditional stochastic processes. ... For this reason, their Swan bird, or the event that gives them wings, is BLANK. It is neither Black nor White; it is neither loaded with improbability nor with probability. It can only be filled with writing, as when we say ‘to fill in the blanks’.” (p. xv)

I am very sympathetic to Ayache’s goal of wresting the trading world from the shackles of probability. I’m just not convinced that the only way to accomplish this is by transforming the presumably mundane action of writing an option into such philosophically fertile ground.

I struggled, and failed, to pull something from Ayache’s text that would, in his words, fill in the blanks of this post and be of interest to most of my followers. The book simply doesn’t lend itself to bite-size extractions. Instead, I will point prospective readers to Ayache’s published articles, some of which were reworked and incorporated into this book. One that I found especially accessible and thought provoking was “I Am a Creator!”


  1. Hi Brenda,
    Thank you for this very valuable review of my book. I am especially sensitive (and appreciative) of what you say about my language and writing style. I do believe that writing an option is a very fertile philosophical ground, however. I am probably biased by my first days as option trader. As a matter of fact, my book is an attempt to make philosophers and metaphysicians aware of derivatives market (rather than making derivatives traders aware of philosophy). This might also be the reason why I am so grandiloquent about the mundane fact of writing an option.
    May I suggest that your followers take I look at the last article I published in Wilmott (The Turning -- July 2010), soon to be posted on the page you indicate. I wrote it after finishing writing the book. I think this is where the metaphysical twist that my books proposes is clearest, even to my own eyes.

  2. Perhaps I might also add that the derivatives market or derivative writing, as we, derivatives traders or engineers, know it, is only the beginning, or the very contracted edge, or what I call the 'market' at large in my book.

    You can describe my struggle, in the most general and highest terms, as a struggle against representational and statist thought, i.e. thought that is shackled to fixed states of the world (what Badiou calls the 'reciprocal play of beings') and to their weighting in thought, what we may call 'probabilistic thought' (in an extended sense of the word 'probability').

    My observation is that Meillassoux's speculation breaks free from such a schema, only Meillassoux is not radical enough, because he typically recedes to the probabilistic realm when he needs to defend his absolute contingency of the laws of nature against the manifest stability of the world.

    To my mind, Meillassoux's discourse does not so much uncover something new about the world or the absolute or the thing-in-itself, as it does something totally revolutionary about thought's own capacities. This is not a trivializing of his philosophy or a recession to the correlationist circle. By making contingency the raw material of the world, I think Meillassoux truly reveals a material (as opposed to conceptual, or probabilistic) property of thought. This is why I argue that the material medium of writing (or the 'market', in the enlarged sense of the word) is the proper medium of his speculation, as opposed to probability. To avoid further confusions, Meillassoux has suggested that I call 'arche-market' this new medium and new category of thought.

    I wouldn't have gone to the lengths of writing Part III of the book (where the 'market' now embraces the world, and becomes a new way of travelling the world and of inverting it, i.e. of doing metaphysics -- even a new way of conceiving books and of writing them) or writing Part IV (where the 'market' becomes a meta-philosophical operator which converts the morbid logic of probability and statist thought into the new logic of contingency) had my ambitions been limited to the vulgar concept of the market.

    In a word, I am as far as can be from claiming that writing derivatives, in the mundane sense of the word, should replace metaphysics. It is for questions of strategy of writing, owing mainly to my personal angle and inclination, that derivatives are my entry point into philosophy.

    As a matter of fact, if what I say is true and what I call 'the market' really acts higher up, at the level where it is decided how the cogs and wheels of thought mesh together, then it should be possible to argue my point from a purely philosophical, or a priori, point of view, without even mentioning the mundane derivatives market.

    This is what I undertake in a paper ('The Medium of Contingency'), which I have written further to my book and I would love to share with you (how?), soon to be published in a strictly philosophical periodical. It is only towards the end of the paper, that I 'identify' my abstract construction with the derivatives market and first utter the word 'market'.

    I thought it was important to make this clarification, because there are indeed, for the time being, 'only a handful of people in the world who are capable of fully understanding and appreciating my book' and because I was lucky enough to find a person like you, who combines philosophy and derivative expertise and is therefore able to point to the way to enlarging this small circle of people.

    All the best,

  3. Thanks for the clarification. You can share your new paper with me at