A. Questions for Submission

6.1 Markets

1. In what sense are market dynamics analogous to planetary dynamics? In what sense are they disanalogous?
2. How might elementary securities be analogous to the concept of atoms in physics? How are they disanalogous? Discuss.

6.2 Representing financial systems

1. What is the difficulty with making predictions about a market on the basis of precise facts about its individual components?
2. What is Milton Friedman's reaction to this situation? Do you agree?
3. What is Donald McKenzie's account of how economic theories represent their targets? Do you agree?

(Optional) For Further Discussion

6.3 Derivatives

1. What is the difference between a call and put option? How do they differ from the notion of an elementary security?
2. A derivative may be based on an underlying security that is elementary, or on an underlying that is another derivative. In practice, a chain of derivatives ultimately terminate with an elementary security. But is this necessary in principle? Discuss.