What will financial derivatives markets look like on the Ethereum blockchain?

Nobody knows the answer to the question, ‘what will financial derivatives markets look like on the Ethereum blockchain?’, but Spritzle is a going be talking about this on Thursday, April 2nd, at Galvanize, in San Francisco. SpecMat will be there, and will or will not be reporting back on it, relative to its level of ‘compelling-ness’.

CT  ct-biz-s-and-p-pit-A_ctmain 0814 sr

Traders-and-clerks-work-a-007

Trading-Floor_794536i

tradingplaces

0068-ctp-coco-The-former-trading-pit-at-the-Minneapolis-Grain-Exchange-has-been-transformed-into-a

Outline of Part IV of On Dromocracy

Outline of Part IV. Elements of Nomadic Distribution observed in Chapter Twelve

 figure2

Introduction

I. Technological Issue. Interminable Deterritorialization (Continuous Recalibration)

1. Interminable Deterritorialization

2. Optionality

3. The Greeks

4. Implied Volatility

II. Institutional Issue. Double Deterritorialization, or Numbering Number

(Exotic Options & a Universal Synthetic CDO)

1. Numbering Number

2. Strange Attractors

3. Clusters of Exotic Options (CEOs)

4. Universal Synthetic CDO (USCDO)

5. Introduction to a H20fall Economy

III. Behavioral Issue. Phase Singularities, Attractors & Affects (H20fall Economy)

1. Operators

2. Phase Singularities

 

back to the present, when we were working towards the future

IMG_3565

Ok, so its time to get back to where we were when we left off at last month to indulge in our annual reading binge. Like most binge-behavior, it started off harmless enough, but then we let our guard down, and now……and now just look at us -we’re unshaven, we’re tired, no, exhausted. But truthfully we also feel kind of good, actually we feel really good: after all, isn’t it all a matter of becoming what you ingest, or rather ingesting what you want to become, and then using these conceptual nutrients towards its ongoing fulfillment of the subjective project whose object you are?

What did we imbibe that left us so inebriated? Don’t worry about it. That doesn’t matter now, it may be known in time. All that matters right now is that we know its time to get back to “it”, which we now will, and will with renewed vigor at that -with that renewed and healthy strength, that clean energy, that bodily-optimism one so easily exudes when the immune system has recently conquered a bad bout of the winter flu (i.e. not just any flu, but that special flu whereby, ten days into it, one has forgotten “what it feels like to feel good”). We always emerge from that flu with, first a smaller quantity of qualitatively stronger energy (Pareto optimality qua energy), but gradually seek to build up the quantity without diminishing its quality (rejecting Pareto optimality in favor of the wager of nomadic distribution). That is where we are now: from sedentary optimality on towards nomadic distribution.

6th Critical Finance Studies Conference

The call for papers for this year’s Critical Finance Studies conference just went out, which can be found here. Joyce Goggin and Thomas Bay are the conference organizers. SpecMat was at last year’s conference at Stockholm Business University. We’ll also be at this year’s conference, at The University of Amsterdam.

1352765833-1890--vincent-van-gogh---the-rising-of-lazarus-after-a-detail-from-an-etching-by-rembrandt--oil-on-canvas--48.5x63-cm--amsterdam-van-gogh-museum

note 1. Topology & the Ontology of Finance

puzzles-7-bridges-map-eulerThe epistemologists of finance (from Marxist economists to quants) are geometers, in that the latter set out to measure quantities (e.g. areas, volumes, values of angles, lengths of sides). However, its not so much that none of these things matter to the topologist as that, first, such quantities prove ordinary whereas topology concerns itself with the singular, and second, in the final analysis there never is any final analysis but only a perpetual becoming of different quantities with their singularities (viz. topological invariants) and affects (viz. traits of expression).The ontologist of finance is for this reason a topologist.

and regressive differentiation continues

buy-green-desks-inmodern-rekindle-deskOne of the more interesting hallmark features of the wholesale transformation to the biota of capital markets these past (roughly) 50 years as been the line of flight from any meaningful distinction between between debt and equity. Like Euclidean geometry, its not so much that the principle of its equivalence classes is so much always “wrong” as it is only sometimes right -of course, how the figure/asset behaves when moving from one to another place in space all depends on the structure to its space of motion.

This trend -i.e of the regressive differentiation between debt and equity- was perhaps first best formally observed by Modigliani and Miller, but since then has been reformulated, both epistemologically (by BSM, etc.) and ontologically (convertible bonds, etc.) time and time again. Issues surrounding the resulting material obfuscation has most recently been reinvoked as a subset debate of the big debate over Dodd-Frank’s ostensible ban on banks’ ability to continue to trade their own capital.  Burne and Tracy’s “Debt Bundles Unloaded Before Bank-Rule Shift” (WSJ, January 9th 2014) report that the $300 bn CLO market has been rumbling as of late in light of the issue of whether banks have to ‘divest themselves of their CLO notes’, precisely because its unclear whether such notes, whose values are tied to the value of of the portfolio of loans,  are debt or equity? If the notes are equity, no, they cannot keep them on their balance sheet; but if they’re debt, then perhaps they may be held. The problem is, no one seems to know for sure: is it debt or is it equity? -the answer is likely “yes, it is”!

The piece can be found here, but is probably less interesting than the aforementioned issue it raises.

Constant Recalibration & Infinite Leverage in a Universal Synthetic CDO

When SpecMat learned that NYU’s Stern was organizing a conference to commemorate/reflect on 40yrs of Black-Scholes-MERTON, we thought it might be a good time to forward an outline of a proposal to be more fully elaborated later. Here it is:

There is the question of what would happen if we were to universally distribute synthetic CDOs (in line with Of Synthetic Finance’s “Ending with a Modest Proposal”), and the subsequent distribution of risks and cash flows and ‘natural leverage’ built-into credit enhanced tranches was perpetually recalibrated in line with Merton’s (and now Ayache’s) contribution to BSM? The short answer is that we would have a universe of risk and cash flow whose distribution is constantly recalibrated, but now with infinite leverage -which may prove to be an instance of nomadic distribution. The longer answer would require a group-theorist, a financial engineer, a game theorist, and a Laplanchian psychoanalyst to model its outcome. This project would be titled “Infinite Leverage in a Constantly Recalibrated Universal Synthetic CDO” (it just rolls off the tongue, right?)