Mathematical  Culture and Thought

Mathematical Culture and Thought

Louis Bachelier’s “Theory of Speculation”

Document Type : Translation

Author
Department of Mathematics, Allameh Tabataba’i University, Iran
Abstract
Louis Bachelier’s 1900 PhD thesis ``‎Th'{‎e}orie de la Sp'{‎e}culation'' introduced mathematical finance
to the world and also provided a kind of agenda for probability theory and stochastic analysis
for the next 65 years or so. The agenda was carried out by succession of the 20th century’s
best mathematician and physicists, but the economic side of Bachelier’s work was completely
ignored until it was taken up by Paul Samuelson in the 1960s. By that time the mathematics —
which certainly was not developed with any view towards applications in economics— was in
perfect shape to solve Samuelson’s problems, and quickly led to the Black-Scholes formula, the
watershed event in financial economics. The aim of this talk is to give some account of this
twin-track development, based on the discussion in the recent book Davis and Etheridge (2006).
The text below consists of some abridged extracts from the book.
Keywords

Subjects


Davis, M. H. A., Etheridge, A., Louis Bachelier’s Theory of Speculation, Princeton University Press, Princeton, 2006, 80-115.

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  • Receive Date 14 May 2022
  • Revise Date 14 March 2023
  • Accept Date 15 March 2023
  • Publish Date 22 May 2025