The idea that significant arbitrage opportunities are unlikely to exist (and certainly do not persist) is precisely the mechanism behind the Black-Scholes option-pricing model that Mr. Derman admires as a financial model behaving pretty well.

WSJ: Book Review: Models Behaving Badly

This mathematical approach to investing led to the famed Capital Asset Pricing Model by Sharpe, Lintner, and Black, the Option Pricing Model by Black and Scholes, and other important theories.

FORBES: Wise Up: 'Normal' Market Behavior Is Not Normal But Crazy Is