From Price to the Market



The distinction between price and value is fundamental to economics, to the financial study of markets, and to political economy; at the same time, the grounds of the distinction itself, and the differentiating characteristics of the two terms, often remains obscure. It would not be too much to say that this obscurity has coloured the entire history of economics through all of its convulsions, and gives a particular complexion to analyses across its spectrum, from politics to mathematized finance. However, we should not be too quick to maintain that a simple misunderstanding is in force in all of these situations; the difficulty perhaps lies in the very nature of the role of price in the modulation of value in social life.


Implied Volatility Price Process Contingent Claim Market Process Economic Thought 
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  1. 1.
    Frank E. Fetter, ‘The Definition of Price,’ The American Economic Review 2:4 (1912), 783–813.Google Scholar
  2. 6.
    Ruyer, R. 1956. ‘Le relief axiologique et le sentiment de la profondeur’, Revue de Métaphyique et de Morale, 61(3/4), 242–58.Google Scholar
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    We must therefore resist the idea that prices have a causal relationship in and of themselves, as if the relationship between the past price and the new price just written formed a kind of Markov chain. See, for example, John van der Hoek and Robert J. Elliott, ‘American option prices in a Markov chain market model,’ Applied Stochastic Models in Business and Industry, 28 (2012), 35–59;CrossRefGoogle Scholar
  4. and John van der Hoek a & Robert J. Elliott, ‘Asset Pricing Using Finite State Markov Chain Stochastic Discount Functions,’ Stochastic Analysis and Applications 30(5), 2012, 865–94. This second paper is notable for its opening line, which betrays the entire problematic of contingency: ‘The future is uncertain.’CrossRefGoogle Scholar
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    For a summary of his position on these instruments and their role in the credit crisis, see Elie Ayache, ‘How not to bid the market goodbye,’ Wilmott Nov 2007, pp. 42–52. For a more introductory account, which charts the rise and fall of CDOs and other complex securities and the role of ratings agencies in this history, see Joshua Coval, Jakub Jurek and Erik Stafford, ‘The Economics of Structured Finance,’ Journal of Economic Perspectives 23:1 (2009), pp. 3–25.CrossRefGoogle Scholar
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    For a brief summary of the various means used to model the prices of CDOs, and their sometimes dramatic deficiencies, see Damiano Brigo, Andrea Pallavicini and Roberto Torresetti, ‘Credit models and the crisis: An overview,’ Journal of Risk Management in Financial Institutions 4:3 (2011), pp. 243–53.Google Scholar
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    For an excellent overview, see Marc Lenglet, ‘Conflicting Codes and Codings: How Algorithmic Trading is Reshaping Financial Regulation,’ Theory Culture Society 28:44 (2011): 44–66. This piece includes a very clear account of the composition of algorithms — both in terms of their complex authorship and with respect to their programming — and the way they are used on a day-to-day basis.CrossRefGoogle Scholar
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    The speed of algorithmic trading, which has given rise to the phrase high frequency trading (or HFT) is often taken to be a decisive socio-political development on its own terms — see for example Nick Srnicek and Alex Williams, ‘On Cunning Automata,’ Collapse 8: 463–506. This speed does indeed have a great deal of interest and importance in the social and political registers (it is in this conjunction that arguments about contemporary forms of inequality), but by itself it tells us precisely nothing about the market. On this point I entirely agree with Ayache when he says that ‘Sadly, HFT is distracting the attention of thinkers and of philosophers away from the hard problem of the market, which is the real metaphysical and ontological problem that derivatives pose.’ (Elie Ayache, ‘Proofs and Calibrations: An Interview with Elie Ayache’ last accessed 9 February 2015). The further equally serious philosophical question, though, is whether the automats in question have access to the market or not. 16. Of course, Ayache is not the only one to yoke together the market and the agent of the trader in this way. A particularly striking case, which differs greatly from Ayache while maintaining the same grip of the human agent over the act of pricing, can be found in Maurizio Lazzarrato’s, Signs and Machines: Capitalism and the Production of Subjectivity, trans. Joshua David Jordan (New York: semio-text(e), 2014), 96–101.Google Scholar

Copyright information

© Jon Roffe 2015

Authors and Affiliations

  1. 1.University of New South WalesAustralia

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