No such thing as a risk-neutral market

TL;DR

This paper explores the historical development of relative valuation in neoclassical finance, emphasizing currency issues in emerging economies and discussing the challenges of mathematical modeling for market regulation.

Contribution

It provides a historical overview and highlights the mathematical modeling challenges for regulating complex market interactions, especially in emerging economies.

Findings

Historical analysis of relative valuation since 1973

Identification of core currency issues in emerging markets

Discussion of mathematical modeling challenges for regulation

Abstract

A very brief history of relative valuation in neoclassical finance since 1973 is presented, with attention to core currency issues for emerging economies. Price formation is considered in the context of hierarchical causality, with discussion focussed on identifying mathematical modelling challenges for robust and transparent regulation of interactions.