The Misbehavior of Markets by Benoit Mandelbrot and Richard Hudson

Hudson writes up the gist of a bunch of Mandelbrot's papers on finance, which in summary point out that stock market returns have fatter tails than the normal distribution. Mandelbrot favors the Cauchy distribution, which is plausible (see my talk on on S&P 500 returns from 1950 to 2010).

The epistemological value of probability theory is based on the fact that chance phenomena, considered collectively and on a grand scale, create a non-random regularity.

-- Andrei Nikolaievitch Kolmogorov, Chapter 2, Chance, Simple or Complex

So, for a speculator, those Xerox options were a new, cheaper way to bet on Xerox stock. The entrance fee was only $5.50 a share in Chicago, compared to $149 in New York.

-- Chapter 4, Black Scholes: What is risk worth?