Tractatus Rationali-Exspectationem
1. The economy is all that is the case.
1.1 The economy is the totality of prices, not of values.
1.11 The economy is determined by the prices, and by their being all the prices.
1.12 For the totality of prices determines what is the case, and also whatever is not the case.
1.13 Prices in the markets are the economy.
1.2 The economy divides into prices.
1.21 Each item can be the case or not the case while everything else remains the same.
2. What is the case—pricing—is the execution of transactions.
2.01 A transaction (an exchange of values) is a combination of values.
2.011 It is essential to values that they should be possible constituents of transactions.
2.012 In markets nothing is accidental: if a value can be monetized in a transaction, the possibility of the transaction must be written into the value itself.
2.0121 It would seem to be a sort of accident, if it turned out that an asset would fit a value that could already exist entirely on its own. If values can be monetized in transactions, this possibility must be in them from the beginning. (Nothing in the province of markets can be merely possible. Markets deal with every possibility and the average of all possibilities are its prices.) Just as we are quite unable to imagine equity values outside profitability or debt values outside timely payment, so too there is no value that we can imagine excluded from the possibility of combining with others. If I can imagine values combined in transactions, I cannot imagine them excluded from the possibility of such combinations.
2.0122 Values are independent in so far as they can be monetized in all possible assets, but this form of independence is a form of connection with transactions, a form of dependence. (It is impossible for a trade to appear simultaneously in two different roles: by themselves, and in propositions.)
2.0123 If I know a value I also know all its possible monetizations in transactions. (Every one of these possibilities must be part of the nature of the value.) A new possibility cannot be discovered later.
2.01231 If I am to know a value, though I need not know its external properties, I must know all its internal properties.
2.0124 If all values are given, then at the same time all possible transactions are also given.
2.013 Each value is, as it were, in a space of possible transactions. This space I can imagine empty, but I cannot imagine the value without the space.
2.0131 An equity value must be situated in nonnegative space. (A book-value is an accounting-place.) An entry in the balance sheet, thought it need not be dollars, must have some currency: it is, so to speak, surrounded by currency-space. Notes must have some maturity, present values of the claims of loans some degree of interest, and so on.
2.014 Values contain the possibility of all assets.
2.0141 The possibility of its being monetized in transactions is the form of a value.
2.02 Values are simple.
2.0201 Every statement about derivatives can be resolved into a statement about their constituents and into the propositions that describe the derivatives completely.
2.021 Values make up the substance of the economy. That is why they cannot be composite.
2.0211 If the economy had no substance, then whether a proposition had sense would depend on whether another proposition was true.
2.0212 In that case we could not provide any estimation of the economy (valid or defective).
2.022 It is obvious that a risk-free economy, however different it may be from the real one, must have something—a form—in common with it.
2.023 Values are just what constitute this unalterable form.
2.0231 The substance of the economy can only determine a form, and not any material properties. For it is only by means of propositions that material properties are represented—only by the configuration of values that they are produced.
2.0232 In a manner of speaking, values are currency-less.
2.0233 If two values have the same market form, the only distinction between them, apart from their external properties, is that they are different.
2.02331 Either a value has properties that nothing else has, in which case we can immediately use a description to distinguish it from the others and refer to it; or, on the other hand, there are several values that have the whole set of their properties in common, in which case it is quite impossible to indicate one of them. For it there is nothing to distinguish a value, I cannot distinguish it, since otherwise it would be distinguished after all.
2.024 The substance is what subsists independently of what is the case.
2.025 It is form and content.
2.0251 Equity, debt, currency (being denominated) are forms of values.
2.026 There must be values, if the economy is to have unalterable form.
2.027 Values, the unalterable, and the subsistent are one and the same.
2.0271 Values are what is unalterable and subsistent; their configuration is what is changing and unstable.
2.0272 The configuration of values produces transactions.
2.03 In a transaction values fit into one another like the links of a chain.
2.031 In a transaction values stand in a determinate relation to one another.
2.032 The determinate way in which values are connected in a transaction is the structure of the transaction.
2.033 Form is the possibility of structure.
2.034 The structure of a price consists of the structures of transactions.
2.04 The totality of executed transactions is the economy.
2.05 The totality of executed transactions also determines which transactions are not executed.
2.06 The execution and non-execution of transactions is reality. (We call the execution of transactions a realized P&L, and their non-execution an unrealized P&L.)
2.061 Transactions are independent of one another.
2.062 From the execution or non-execution of one transaction it is impossible to infer the execution or non-execution of another.
2.063 The sum-total of reality is the economy.
2.1 We quote prices to ourselves.
2.11 A quote presents an asset in market space, the execution and non-execution of transactions.
2.12 A quote is a model of reality.
2.13 In a quote values have the elements of the quote corresponding to them.
2.131 In a quote the elements of the quote are the representatives of values.
2.14 What constitutes a quote is that its elements are related to one another in a determinate way.
2.141 A quote is a price.
2.15 The price that the elements of a quote are related to one another in a determinate way represents that values are related to one another in the same way. Let us call this connection of its elements the structure of the quote, and let us call the possibility of this structure the indicative form of the quote.
2.151 Indicative form is the possibility that values are related to one another in the same way as the elements of the quote.
2.1511 That is how a quote is attached to reality; it reaches right out to it.
2.1512 It is laid against reality like a measure.
2.15121 Only the end-points of the bid-ask spread actually touch the value that is to be measured.
2.1514 So a quote, conceived in this way, also includes the indicative relationship, which makes it into a quote.
2.1515 These correlations are, as it were, the feelers of the quote's elements, with which the quote touches reality.
2.16 If a price is to be a quote, it must have something in common with what it depicts.
2.161 There must be something identical in a quote and what it depicts, to enable the one to be a quote of the other at all.
2.17 What a quote must have in common with reality, in order to be able to depict it—at-market or off-market—in the way that it does, is its indicative form.
2.171 A quote can depict any reality whose form it has. An equity quote can depict anything profitable, a currency one anything denominated, etc.
2.172 A quote cannot, however, depict its indicative form: it displays it.
2.173 A quote represents its subject from a position outside it. (Its standpoint is its representational form.) That is why a quote represents its subject at-market or off-market.
2.174 A quote cannot, however, place itself outside its representational form.
2.18 What any quote, of whatever form, must have in common with reality, in order to be able to depict it—at-market or off-market—in any way at all, is market form, i.e. the form of reality.
2.181 A quote whose indicative form is market form is called a market quote.
2.182 Every quote is at the same time a market one. (On the other hand, not every quote is, for example, a equity one.)
2.19 Market quotes can depict the economy.
2.2 A quote has market quotation form in common with what it depicts.
2.201 A quote depicts reality by representing a possibility of execution and non-execution of transactions.
2.202 A quote contains the possibility of the asset that it represents.
2.203 A quote agrees with reality or fails to agree; it is at-market or off-market, valid or defective.
2.22 What a quote represents it represents independently of its validity or defectiveness, by means of its indicative form.
2.221 What a quote represents is its sense.
2.222 The agreement or disagreement or its sense with reality constitutes its validity or defectiveness.
2.223 In order to tell whether a quote is valid or defective we must compare it with reality.
2.224 It is impossible to tell from the quote alone whether it is valid or defective.
2.225 There are no quotes that are valid a priori.
I could continue, but it would involve the arcana of CAPM theory, financial modeling and back-office / accounting mechanics, and I’m boring us already. Sometimes even whereof one may speak, thereof it is best that one remain silent.
1.1 The economy is the totality of prices, not of values.
1.11 The economy is determined by the prices, and by their being all the prices.
1.12 For the totality of prices determines what is the case, and also whatever is not the case.
1.13 Prices in the markets are the economy.
1.2 The economy divides into prices.
1.21 Each item can be the case or not the case while everything else remains the same.
2. What is the case—pricing—is the execution of transactions.
2.01 A transaction (an exchange of values) is a combination of values.
2.011 It is essential to values that they should be possible constituents of transactions.
2.012 In markets nothing is accidental: if a value can be monetized in a transaction, the possibility of the transaction must be written into the value itself.
2.0121 It would seem to be a sort of accident, if it turned out that an asset would fit a value that could already exist entirely on its own. If values can be monetized in transactions, this possibility must be in them from the beginning. (Nothing in the province of markets can be merely possible. Markets deal with every possibility and the average of all possibilities are its prices.) Just as we are quite unable to imagine equity values outside profitability or debt values outside timely payment, so too there is no value that we can imagine excluded from the possibility of combining with others. If I can imagine values combined in transactions, I cannot imagine them excluded from the possibility of such combinations.
2.0122 Values are independent in so far as they can be monetized in all possible assets, but this form of independence is a form of connection with transactions, a form of dependence. (It is impossible for a trade to appear simultaneously in two different roles: by themselves, and in propositions.)
2.0123 If I know a value I also know all its possible monetizations in transactions. (Every one of these possibilities must be part of the nature of the value.) A new possibility cannot be discovered later.
2.01231 If I am to know a value, though I need not know its external properties, I must know all its internal properties.
2.0124 If all values are given, then at the same time all possible transactions are also given.
2.013 Each value is, as it were, in a space of possible transactions. This space I can imagine empty, but I cannot imagine the value without the space.
2.0131 An equity value must be situated in nonnegative space. (A book-value is an accounting-place.) An entry in the balance sheet, thought it need not be dollars, must have some currency: it is, so to speak, surrounded by currency-space. Notes must have some maturity, present values of the claims of loans some degree of interest, and so on.
2.014 Values contain the possibility of all assets.
2.0141 The possibility of its being monetized in transactions is the form of a value.
2.02 Values are simple.
2.0201 Every statement about derivatives can be resolved into a statement about their constituents and into the propositions that describe the derivatives completely.
2.021 Values make up the substance of the economy. That is why they cannot be composite.
2.0211 If the economy had no substance, then whether a proposition had sense would depend on whether another proposition was true.
2.0212 In that case we could not provide any estimation of the economy (valid or defective).
2.022 It is obvious that a risk-free economy, however different it may be from the real one, must have something—a form—in common with it.
2.023 Values are just what constitute this unalterable form.
2.0231 The substance of the economy can only determine a form, and not any material properties. For it is only by means of propositions that material properties are represented—only by the configuration of values that they are produced.
2.0232 In a manner of speaking, values are currency-less.
2.0233 If two values have the same market form, the only distinction between them, apart from their external properties, is that they are different.
2.02331 Either a value has properties that nothing else has, in which case we can immediately use a description to distinguish it from the others and refer to it; or, on the other hand, there are several values that have the whole set of their properties in common, in which case it is quite impossible to indicate one of them. For it there is nothing to distinguish a value, I cannot distinguish it, since otherwise it would be distinguished after all.
2.024 The substance is what subsists independently of what is the case.
2.025 It is form and content.
2.0251 Equity, debt, currency (being denominated) are forms of values.
2.026 There must be values, if the economy is to have unalterable form.
2.027 Values, the unalterable, and the subsistent are one and the same.
2.0271 Values are what is unalterable and subsistent; their configuration is what is changing and unstable.
2.0272 The configuration of values produces transactions.
2.03 In a transaction values fit into one another like the links of a chain.
2.031 In a transaction values stand in a determinate relation to one another.
2.032 The determinate way in which values are connected in a transaction is the structure of the transaction.
2.033 Form is the possibility of structure.
2.034 The structure of a price consists of the structures of transactions.
2.04 The totality of executed transactions is the economy.
2.05 The totality of executed transactions also determines which transactions are not executed.
2.06 The execution and non-execution of transactions is reality. (We call the execution of transactions a realized P&L, and their non-execution an unrealized P&L.)
2.061 Transactions are independent of one another.
2.062 From the execution or non-execution of one transaction it is impossible to infer the execution or non-execution of another.
2.063 The sum-total of reality is the economy.
2.1 We quote prices to ourselves.
2.11 A quote presents an asset in market space, the execution and non-execution of transactions.
2.12 A quote is a model of reality.
2.13 In a quote values have the elements of the quote corresponding to them.
2.131 In a quote the elements of the quote are the representatives of values.
2.14 What constitutes a quote is that its elements are related to one another in a determinate way.
2.141 A quote is a price.
2.15 The price that the elements of a quote are related to one another in a determinate way represents that values are related to one another in the same way. Let us call this connection of its elements the structure of the quote, and let us call the possibility of this structure the indicative form of the quote.
2.151 Indicative form is the possibility that values are related to one another in the same way as the elements of the quote.
2.1511 That is how a quote is attached to reality; it reaches right out to it.
2.1512 It is laid against reality like a measure.
2.15121 Only the end-points of the bid-ask spread actually touch the value that is to be measured.
2.1514 So a quote, conceived in this way, also includes the indicative relationship, which makes it into a quote.
2.1515 These correlations are, as it were, the feelers of the quote's elements, with which the quote touches reality.
2.16 If a price is to be a quote, it must have something in common with what it depicts.
2.161 There must be something identical in a quote and what it depicts, to enable the one to be a quote of the other at all.
2.17 What a quote must have in common with reality, in order to be able to depict it—at-market or off-market—in the way that it does, is its indicative form.
2.171 A quote can depict any reality whose form it has. An equity quote can depict anything profitable, a currency one anything denominated, etc.
2.172 A quote cannot, however, depict its indicative form: it displays it.
2.173 A quote represents its subject from a position outside it. (Its standpoint is its representational form.) That is why a quote represents its subject at-market or off-market.
2.174 A quote cannot, however, place itself outside its representational form.
2.18 What any quote, of whatever form, must have in common with reality, in order to be able to depict it—at-market or off-market—in any way at all, is market form, i.e. the form of reality.
2.181 A quote whose indicative form is market form is called a market quote.
2.182 Every quote is at the same time a market one. (On the other hand, not every quote is, for example, a equity one.)
2.19 Market quotes can depict the economy.
2.2 A quote has market quotation form in common with what it depicts.
2.201 A quote depicts reality by representing a possibility of execution and non-execution of transactions.
2.202 A quote contains the possibility of the asset that it represents.
2.203 A quote agrees with reality or fails to agree; it is at-market or off-market, valid or defective.
2.22 What a quote represents it represents independently of its validity or defectiveness, by means of its indicative form.
2.221 What a quote represents is its sense.
2.222 The agreement or disagreement or its sense with reality constitutes its validity or defectiveness.
2.223 In order to tell whether a quote is valid or defective we must compare it with reality.
2.224 It is impossible to tell from the quote alone whether it is valid or defective.
2.225 There are no quotes that are valid a priori.
I could continue, but it would involve the arcana of CAPM theory, financial modeling and back-office / accounting mechanics, and I’m boring us already. Sometimes even whereof one may speak, thereof it is best that one remain silent.
posted by nnyhav | 23:11
10 Comments:
4.461 Assets show what they say; debits and CDO's show that they say nothing.
Like that?
Actually it's contracts and hedging attendent rights & obligations at issue here.
For the distinction between analytic and synthetic CDO's it's best to go back to Kant's Critique of Riskless Arbitrage.
oi.
in case you're interested. there's another big literature board I'm on, it's the main board of WLF users spoooooool, Fausto, and Funhouse.
http://z11.invisionfree.com/thefictionalwoods/index.php?
Considerably less formal and structured which has advantages and disadvantages.
Offtopic, 1FM, when I try to reply:
Sorry, an error occurred. If you are unsure on how to use a feature, or don't know why you got this error message, try looking through the help files for more information.
The error returned was:
Sorry, you do not have permission to reply to that topic.
No reply from admin either. thxneway.
admin isn't often there. maybe suzannah can help? but it would be a registration issue I guess
quote bleakhouse:
"thanks for the heads up-- i validated them.
so many spambots register per day that it's hard to tell who's a real registration."
Heh heh. As with St. Witt.'s own apothegms of TLP, rather lacking in awareness of commodity, however (and shall we say economic materialism as a whole): Senor Commodity, the ugly naturalist refused entrance to the tea-party of neo-classicists and Keynesians (actually Keynes one of St. Witt's secret palsies in the Apostles, reportedly...).
CelaSpeak entertains. Anyone who sees the city of ho's can't be all bad (er, the ho commodity).
As far as naturalism goes, I contemplated 13 Ways of Looking at a CDO ("Amid ninety corporate names / the only moving thing / was the spread of a CDO") but thought better of it.
Hmmmmm........
"I Sing the investment in infrastructure Electric!
The armies of market mechanisms I love engirth me, and I engirth them; They show a general tendency towards equilibrium........."
Eh, sux.
Really, the proper satire would have financier-priests or Uni. of Chicago econ. professors intoning Keynesian or supply-side maxims in Latin......or maybe hebrew
AHHH So it IS Satire. I was having a hard time deciding if the author was serious.
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