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Must I distrust the gently-warning impulse, the precept That thou, Nature, thyself hast in my bosom impressed, Till the schools have affixed to the writ eternal their signet, Till a mere formula's chain binds down the fugitive soul? Answer me, then! for thou hast down into these deeps e'en descended, Out of the mouldering grave thou didst uninjured return.
"It's our business to see the truth of things, while you try to make it fit your formulas about what you think is most useful to yourself or society. A formula's like bad spectacles; it distorts the sight, and yours is plainly out of focus. For example, I guess you're satisfied with the white clothes you're wearing." "I don't know that it's important, but what's the matter with them?"
Black-Scholes is thought deficient on other issues as well. The implied volatilities of different options on the same stock tend to vary, defying the formula's postulate that a single stock can be associated with only one value of implied volatility. The model assumes a certain geometric Brownian distribution of stock prices that has been shown to not apply to US markets, among others.
"But, Dad," queried Hal, with an effort of puzzled reminiscence, "in the old days Certina wasn't a kidney remedy, was it?" "Not specially. It's always been good for the kidneys. Good for everything, for that matter. Besides, the formula's been changed." "Changed? But the formula's the vital thing, isn't it?" "Yes, yes. Of course. Certainly it's the vital thing: certainly.
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