Louis Bachelier's Theory of Speculation

The Origins of Modern Finance

Mark Davis, Alison Etheridge

190 pages, parution le 05/09/2006

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Résumé

March 29, 1900, is considered by many to be the day mathematical finance was born. On that day a French doctoral student, Louis Bachelier, successfully defended his thesis Théorie de la Spéculation at the Sorbonne. The jury, while noting that the topic was "far away from those usually considered by our candidates," appreciated its high degree of originality. This book provides a new translation, with commentary and background, of Bachelier's seminal work.

Bachelier's thesis is a remarkable document on two counts. In mathematical terms Bachelier's achievement was to introduce many of the concepts of what is now known as stochastic analysis. His purpose, however, was to give a theory for the valuation of financial options. He came up with a formula that is both correct on its own terms and surprisingly close to the Nobel Prize-winning solution to the option pricing problem by Fischer Black, Myron Scholes, and Robert Merton in 1973, the first decisive advance since 1900.

Aside from providing an accurate and accessible translation, this book traces the twin-track intellectual history of stochastic analysis and financial economics, starting with Bachelier in 1900 and ending in the 1980s when the theory of option pricing was substantially complete. The story is a curious one. The economic side of Bachelier's work was ignored until its rediscovery by financial economists more than fifty years later. The results were spectacular: within twenty-five years the whole theory was worked out, and a multibillion-dollar global industry of option trading had emerged.

Sommaire

Foreword
Preface
Mathematics and Finance
Théorie de la Spéculation
From Bachelier to Kreps, Harrison and Pliska
Facsimile of Bachelier's Original Thesis
References

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Caractéristiques techniques

	PAPIER
Éditeur(s)	Princeton University Press
Auteur(s)	Mark Davis, Alison Etheridge
Parution	05/09/2006
Nb. de pages	190
Format	16 x 24
Couverture	Relié
Poids	458g
Intérieur	Noir et Blanc
EAN13	9780691117522
ISBN13	978-0-691-11752-2