What if Black-Scholes is wrong?

Columnist and author Michael Lewis notes that Black-Scholes--AKA black holes--really has been ingrained into the financial industry. Pensions, hedge funds, compensation committees, risk managers--all rely on Black Scholes and its variants. Lewis raises an interesting question though: What if the model is wrong? He notes that the theory falls apart when markets panic. And he even quotes a few people saying that nobody really believes in the equation anymore. One former trader, Nassim Nicholas Taleb, via economic papers, is attacking the theory head on.  

For more:
- here's Lewis' column in Portfolio

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