## Misbehavior of MarketsBenoit B. Mandelbrot, one of the century's most influential mathematicians, is world-famous for making mathematical sense of a fact everybody knows but that geometers from Euclid on down had never assimilated: Clouds are not round, mountains are not cones, coastlines are not smooth. To these classic lines we can now add another example: Markets are not the safe bet your broker may claim. In his first book for a general audience, Mandelbrot, with co-author Richard L. Hudson, shows how the dominant way of thinking about the behavior of markets-a set of mathematical assumptions a century old and still learned by every MBA and financier in the world-simply does not work. As he did for the physical world in his classic The Fractal Geometry of Nature, Mandelbrot here uses fractal geometry to propose a new, more accurate way of describing market behavior. The complex gyrations of IBM's stock price and the dollar-euro exchange rate can now be reduced to straightforward formulae that yield a far better model of how risky they are. With his fractal tools, Mandelbrot has gotten to the bottom of how financial markets really work, and in doing so, he describes the volatile, dangerous (and strangely beautiful) properties that financial experts have never before accounted for. The result is no less than the foundation for a new science of finance. |

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### Contents

Risk Ruin and Reward | 3 |

By the Toss of a Coin or the Flight of an Arrow | 25 |

Bachelier and His Legacy | 43 |

The House of Modern Finace | 59 |

The Case Against the Modern Theory of Finance | 79 |

Images of the Abnormal | 88 |

The New Way | 109 |

Turbulent Markets A Preview | 111 |

Long Memory from the Nile to the Marketplace | 173 |

Noah Joseph and Market Bubbles | 197 |

The Multifractal Nature of Trading Time | 207 |

The Way Ahead | 223 |

Ten Heresies of Finance | 225 |

In the Lab | 253 |

Notes | 277 |

303 | |

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