The Rise Of The Quants: Marschak, Sharpe, Black, Scholes And Merton (great Minds In Finance)

The third book in the Great Minds in Finance series examines the pricing of securities and the risk/reward trade off through the legends, contribution, and legacies of Jacob Marschak, William Sharpe, Fischer Black and Myron Scholes, and Robert Merton, influencing both theory and practice, answering the question 'how do we measure risk?' This is the third in a series of books about the 'great minds' in the history and theory of finance. The first book in the series examines the role of returns in our personal financial decisions. The second book adds risk and uncertainty to the mix. In the third book, Colin Read looks at the innovators who took the simple finance models of the 1940s and 1950s and developed from them the tools we use today to analyze the value of securities. These tools also revolutionized the study of finance and heralded in a new and distinctly American quant school of finance and decision making over time. This book chronicles the great minds who were transformational in taking the Ivory Tower to Wall Street. They answer the following questions: How do we measure risk? Can we standardize how our measure of risk affects a market-determined securities price? How does time affect the price path of a security? And, how does one determine the price of an option that derives its value based on the value of an underlying security? Finally, how can we use these tools to diversify our risk and optimize our portfolio? Their solutions to these questions transformed the static and theoretical world of economics into one that could cope with the quantification and time dynamic needs of modern finance. The author examines the pricing of securities and the risk/reward tradeoff through the legends, contribution, and legacies of Jacob Marschak, William Sharpe, Fischer Black and Myron Scholes, and Robert Merton. These Pricing Analysts provided us with the first effective models that allow the practitioner to price risk and the value of individual securities. They effectively bridged significant advances from the life cyclists in the 1940s and the portfolio theorists of the 1950s, and brought theory into practice. In doing so, these great minds forever established the relevancy of financial theory on the functioning of global financial markets. They also forever changed finance the clearly established the discipline as distinct from economics. This profound influence on both theory and practice is a hallmark of great minds Front Matter....Pages i-x Introduction....Pages 1-3 A Roadmap to Resolve the Big Questions....Pages 4-6 Front Matter....Pages 7-7 The Early Years....Pages 9-15 The Times....Pages 16-18 The Theory....Pages 19-27 Applications....Pages 28-34 Life and Legacy....Pages 35-39 Front Matter....Pages 41-41 The Early Years....Pages 43-54 The Times....Pages 55-60 The Theory....Pages 61-68 Applications....Pages 69-74 Life and Legacy....Pages 75-80 Front Matter....Pages 81-81 The Early Years....Pages 83-95 The Times....Pages 96-108 The Black-Scholes Options Pricing Theory....Pages 109-116 Applications....Pages 117-124 The Nobel Prize, Life, and Legacy....Pages 125-131 Front Matter....Pages 133-133 The Early Years....Pages 135-145 The Times....Pages 146-151 The Theory....Pages 152-156 Front Matter....Pages 133-133 Applications....Pages 157-162 The Nobel Prize, Life, and Legacy....Pages 163-174 Front Matter....Pages 175-175 Combined Contributions....Pages 177-178 Conclusions....Pages 179-181 Back Matter....Pages 182-195 Cover 1 Half-Title 2 Title 4 Copyright 5 Contents 6 List of Figures 8 Preface to the Great Minds in Finance series 9 1 Introduction 12 2 A Roadmap to Resolve the Big Questions 15 Part I Jacob Marschak 18 3 The Early Years 19 4 The Times 26 5 The Theory 29 6 Applications 38 7 Life and Legacy 45 Part II William Forsyth Sharpe, John Lintner, Jan Mossin, and Jack Treynor 50 8 The Early Years 51 9 The Times 63 10 The Theory 69 11 Applications 77 12 Life and Legacy 83 Part III Fischer Black and Myron Scholes 89 13 The Early Years 90 14 The Times 103 15 The Black- Scholes Options Pricing Theory 116 16 Applications 124 17 The Nobel Prize, Life, and Legacy 132 Part IV Robert Merton 139 18 The Early Years 140 19 The Times 151 20 The Theory 157 21 Applications 162 22 The Nobel Prize, Life, and Legacy 168 Part V What We Have Learned 180 23 Combined Contributions 181 24 Conclusions 183 Notes 186 Glossary 192 Index 197 Machine generated contents note: -- Preface to the Series Introduction A Roadmap to Resolve the Big Questions PART I:JACOB MARSCHAK The Early Years The Times The Theory Applications Life and Legacy PART II: WILLIAM FORSYTH SHARPE, JOHN LINTNER, JAN MOSSIN, AND JACK TREYNOR The Early Years The Times The Theory Applications The Nobel Prize, Life, and Legacy PART III:FISCHER BLACK AND MYRON SCHOLES The Early Years The Times The Theory Applications The Nobel Prize, Life, and Legacy PART IV: ROBERT MERTON The Early Years The Times The Theory Applications The Nobel Prize, Life, and Legacy PART V: WHAT WE HAVE LEARNED Combined Contributions Conclusions Glossary Index Endnotes "The third book in the Great Minds in Finance series examines the pricing of securities and the risk/reward trade off through the legends, contribution, and legacies of Jacob Marschak, William Sharpe, Fischer Black and Myron Scholes, and Robert Merton, influencing both theory and practice, enabling the question of how do we measure risk? "-- Provided by publisher