 Paving Wall Street: Experimental Economics & the Quest for the Perfect Market
ISBN: 978-0-471-12198-5
Hardcover
336 pages
December 2001
US $34.95
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Foreword by Vernon L. Smith.
Preface.
Acknowledgments.
Chronology of Major Events.
PART I: BUBBLES AND EXPERIMENTS.
1 Wind Tunnel Markets.
Step into the Wind Tunnel.
Our Road Map.
2 Bargain Hunting.
Capturing the Human Element.
Rationality and Induced Value at Your Corner Grocer.
Let's Make a Deal.
Games and Strategies.
It Came from Harvard.
3 A Tale of Two Smiths.
The Law of Supply and Demand.
The Groping Market.
New Market Rules.
Perfect Without Knowledge.
4 Bubbles in the Lab.
Cycling Through Time.
The Seasonal Shift.
Speculators Enter the Laboratory.
Behold the Bubble.
On the Origin of Bubbles.
5 Bubbles in the Wild.
Asset Valuation and Efficient Markets.
From Noise to Irrationality.
Breaking the Bank.
Bubbles: Rational or Irrational?
Potholes on Wall Street.
PART II: INSIDE MARKETS: OPTIONS, INFORMATION, AND LIQUIDITY.
6 Black Monday.
Peering into the Abyss.
The Quantitative Finance Revolution.
It's There Until You Need It.
Programmed to Trade.
7 All the World's an Option.
How Do You Value an Option?
The Formula for Options.
The Universal Nature of Options.
Options Rule on Wall Street.
Spreads and the Risk of Default.
Liquidity:The Ultimate Option.
8 The Invisible Hand Discovers Prices.
Price Impact and Market Manipulations.
Toward Instantaneous Price Discovery.
One-Sided Auction Markets.
Vickery's Solution.
Deviant Auctions.
9 Sending Signals and Keeping Score.
Lemons Squeeze the Market Mechanism.
The Theory of Market Signaling.
Learning to Signal in the Laboratory.
Prices as Scorekeepers.
The Art of Indexing.
The Limits to Aggregation.
10 It All Comes Down to Money.
Money, Expectations, and Illusion.
The Emergence of Money.
Future Money.
PART III: GRIDLOCK AND THE ROAD TO SMART MARKETS.
11 The Market Is Tied Up in Knots.
Long-Term Gridlock.
Arbitrage Has Its Limits.
Markets as Matchmakers.
Smart Enough to Weave a Basket.
12 Making Markets Intelligent.
Adding Baskets to the Market.
Self-Arbitraging Markets.
Recombinant Securities Markets.
All or Nothing at All.
Breaking the Law of a Single Price.
13 The Smart Auction Block.
Bandwidth for Sale.
Location, Location, Location . . . and Synergy,Too.
Combinatorial Auctions: Optimization on the Fly.
NASA's Awesome Wind Tunnel.
Learning by Doing at the FCC.
14 Good Intentions.
FCC versus SEC.
Powerless.
The Rules of Engagement.
Notes.
Bibliography.
Index.
Preface.
Acknowledgments.
Chronology of Major Events.
PART I: BUBBLES AND EXPERIMENTS.
1 Wind Tunnel Markets.
Step into the Wind Tunnel.
Our Road Map.
2 Bargain Hunting.
Capturing the Human Element.
Rationality and Induced Value at Your Corner Grocer.
Let's Make a Deal.
Games and Strategies.
It Came from Harvard.
3 A Tale of Two Smiths.
The Law of Supply and Demand.
The Groping Market.
New Market Rules.
Perfect Without Knowledge.
4 Bubbles in the Lab.
Cycling Through Time.
The Seasonal Shift.
Speculators Enter the Laboratory.
Behold the Bubble.
On the Origin of Bubbles.
5 Bubbles in the Wild.
Asset Valuation and Efficient Markets.
From Noise to Irrationality.
Breaking the Bank.
Bubbles: Rational or Irrational?
Potholes on Wall Street.
PART II: INSIDE MARKETS: OPTIONS, INFORMATION, AND LIQUIDITY.
6 Black Monday.
Peering into the Abyss.
The Quantitative Finance Revolution.
It's There Until You Need It.
Programmed to Trade.
7 All the World's an Option.
How Do You Value an Option?
The Formula for Options.
The Universal Nature of Options.
Options Rule on Wall Street.
Spreads and the Risk of Default.
Liquidity:The Ultimate Option.
8 The Invisible Hand Discovers Prices.
Price Impact and Market Manipulations.
Toward Instantaneous Price Discovery.
One-Sided Auction Markets.
Vickery's Solution.
Deviant Auctions.
9 Sending Signals and Keeping Score.
Lemons Squeeze the Market Mechanism.
The Theory of Market Signaling.
Learning to Signal in the Laboratory.
Prices as Scorekeepers.
The Art of Indexing.
The Limits to Aggregation.
10 It All Comes Down to Money.
Money, Expectations, and Illusion.
The Emergence of Money.
Future Money.
PART III: GRIDLOCK AND THE ROAD TO SMART MARKETS.
11 The Market Is Tied Up in Knots.
Long-Term Gridlock.
Arbitrage Has Its Limits.
Markets as Matchmakers.
Smart Enough to Weave a Basket.
12 Making Markets Intelligent.
Adding Baskets to the Market.
Self-Arbitraging Markets.
Recombinant Securities Markets.
All or Nothing at All.
Breaking the Law of a Single Price.
13 The Smart Auction Block.
Bandwidth for Sale.
Location, Location, Location . . . and Synergy,Too.
Combinatorial Auctions: Optimization on the Fly.
NASA's Awesome Wind Tunnel.
Learning by Doing at the FCC.
14 Good Intentions.
FCC versus SEC.
Powerless.
The Rules of Engagement.
Notes.
Bibliography.
Index.
