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Louis Bachelier's Theory of Speculation: The Origins of Modern Finance Hardcover – 5 Sep 2006

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Product details

  • Hardcover: 206 pages
  • Publisher: Princeton University Press (5 Sept. 2006)
  • Language: English
  • ISBN-10: 0691117527
  • ISBN-13: 978-0691117522
  • Product Dimensions: 15.6 x 1.3 x 23.4 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: 334,933 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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From the Back Cover


"Mark Davis and Alison Etheridge have done a splendid job in translating the Bachelier thesis, thus making it accessible to a wide audience. Apart from the thesis itself, they provide the reader with institutional information, a biography of Bachelier, and a short history of the development of stochastic analysis and mathematical finance. The result is a nice slim volume that will certainly be on the bookshelves of everyone interested in the subject."--Tomas Björk, Professor of Mathematical Finance, Stockholm School of Economics


"This gem of a book will please many readers, including students and researchers in economics, finance, mathematics, and physics. Beyond presenting an annotated translation of Bachelier's original thesis, it also provides a historical overview of the key scientific developments in various fields related to the concepts Bachelier introduced. It reads very well and offers great insight into the historical developments of probability and mathematical finance."--Paul Embrechts, ETH Zurich, coauthor of Quantitative Risk Management


"Louis Bachelier's thesis is a seminal work, and to have it readily accessible will be a most valuable contribution to the field. This book represents a timely look back at the scientific origins of the enormously important modern-day finance industry."--Chris Rogers, University of Cambridge, coauthor of Diffusions, Markov Processes and Martingales, Volumes 1 and 2


About the Author

Mark Davis, Professor of Mathematics at Imperial College London, has written three books on stochastic modeling and control, most recently "Markov Models and Optimization". Alison Etheridge, Professor of Probability at the University of Oxford, is the author of "A Course in Financial Calculus" and "Introduction to Superprocesses".

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1 of 1 people found the following review helpful By M. Mainelli on 9 Sept. 2012
Format: Hardcover
Professors Davis and Etheridge have brought out a remarkably friendly book in four chapters - "Mathematics and Finance", "Théorie de la Spéculation", "From Bachelier to Kreps, Harrison and Pliska" and "Facsimile of Bachelier's Original Thesis". It is a fun, even swift read, belying its length. With his earned authority, Samuelson extols the importance of Bachelier in the foreword. Davis and Etheridge set the context in a very human way. The reader gets to engage with Bachelier directly, and finds his work crosses the gap of a century with ease. The Sorbonne instructors' report on the thesis is also included, permitting us to see how it was evaluated in its own time. The inclusion of Bachelier's original thesis as a facsimile is a delightful touch, allowing the reader to feel the début de siècle through the typesetting and to delve into portions of the thesis for direct contact, without being intimidated by rusty or poor French. Davis' and Etheridge's discussion of the work's influence and context in the modern world is incisive without being voluminous. A few pages of references help to set the thesis in a wider context. The only material complaint is that there is no index.

This book suits anyone working in quantitative finance. Bachelier's thesis engages us formally with the paradox that besets the heart of financial theory, "if markets are random then how do people make money?" In order to find the `non-random' in markets, we must first understand the stochastic theory of markets. This "illuminating homage to a long underrated science hero" (Samuelson's words) is a fitting place to start.
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 7 reviews
7 of 8 people found the following review helpful
Thank you Davis and Etheridge 10 April 2007
By Bachelier - Published on Amazon.com
Format: Hardcover
Finally, a worthy title, a worthy edition and binding, and worthy translation of the forgotten paper that transformed the world of finance long after its genius author had passed from this mortal coil. Louis Bachelier's "The Theory of Speculation" was previously only available in French (online at NUMDAM, under Théorie de la spéculation. Annales scientifiques de l'École Normale Supérieure) and in English in the obscure 1971 book "The Random Character of the Stock Market" edited by MIT's Paul Cootner.

Davis and Etheridge's commentary and background and helpful timeline are all welcome, but a thorough biography of Bachelier and his sad life remains to be written. The index is adequate for such a slender volume.
3 of 3 people found the following review helpful
Modern finance. 2 Jan. 2013
By Palle E T Jorgensen - Published on Amazon.com
Format: Hardcover Verified Purchase
It is a translation of a PhD thesis, but not just any thesis. Below is why.
The thesis is written by a Frenchman more than 100 years ago, Louis Bachelier. He studied the stock market in Paris in 1900, and the thesis committee included the leading mathematicians of the time, Poincare among them. Bachelier's work was not understood or appreciated at the time; but later it turned out to be extraordinarily influential.
The book has both the French original in full, as well as an excellent translation. The first half of the book is commentary.
At the time 1900, the work was undervalued and largely ignored. This despite its originality.
Several reasons: Bachelier's ideas were ahead of their time. Further, his style was different from norms in mathematics, regarding axioms, definitions, and proofs. The subject, probability and stochastic processes were not well thought of then.

What we now call Brownian motion was rediscovered by Albert Einstein 5 years later (for completely different reasons). And the circle of ideas grew with work of N. Wiener, Kolmogorv, Levy, Ito, Doob, Black, Scholes and others; ... who won glory and prizes. Sadly, Bachelier spent his life in obscurity.
In the 1960ties, Bachelier's thesis came to the attention of the MIT economist, Paul Samuelson, and inspired a new science of mathematical finance, Black-Scholes, Merton, Markowitz...
The book begins with an Intro by Samuelson, and it contains excellent accounts of both the history, the trends, and a sketch of main ideas; all beautifully presented by the two authors M Davies and A Etheridge. It is a valuable historic document, and at the same time delightful reading. Review by Palle ET Jorgensen, December 1213.
6 of 7 people found the following review helpful
Speculations on the "Theory of Speculation" 10 Oct. 2006
By Hal Martin - Published on Amazon.com
Format: Hardcover
This is an excellent book on the origins of computational finance. It discusses the academic beginnings in the early twentieth century. Finance is a strange subject that is hard to study because people are usually not too willing to share their discoveries- they would rather make massive profits off of them! This book discusses Bachelier's incredible thesis on several levels. He has some very interesting stochastic analysis, but more importantly he discovered a method for the valuation of options- the basis of modern finance.
Out of my depth 21 Sept. 2012
By coachyawe - Published on Amazon.com
Format: Hardcover
At times it helps to read something that is clearly out of your depth, it forcing you to think deeper and for those of us in mid age at is an essential activity if you hope to delay or totally avoid brain atrophy.

It humbles you to know that there is so much you do not know especially when reading a book based on a concept written in 1900
Very nice 17 April 2014
By KT - Published on Amazon.com
Format: Hardcover Verified Purchase
This is book is best suited for market researchers and historians. It is one of the early attempts in recent history which employs an objective approach to the behavior of markets.
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