--- Les Schaffer <godzilla at netmeg.net> wrote:
[a vast number of interesting things which I won't reproduce]
Chrikey! You now know about ten times as much about Bachelier as I do. All I really have to go on is an off-the-cuff reference intended to leaven the early chapters of "The Mathematics of Financial Derivatives" by Saul Neftci, which, if you *really* have to learn about PDEs and martingales, is about the least painful way to do so. I think you're right that EInstein never saw his work, but morphic resonance might have occurred.
Bachelier wasn't as "forgotten" as all that. Samuelson was the one to revive most of his academic work, but his main contribution to the world are "Bachelier Diagrams", which graph the payout from an options position against the price of the underlying at strike. As far as I can tell, these have been called Bachelier diagrams pretty much continuously since he invented them; albeit that they're not really a useful academic tool, but a staple of graduate training programs for baby options dealers.
Sadly, finance theory never really got to grips with absorbing and reflecting barriers for Brownian motions. We cheated, and solved the problem that stock prices can't go negative by arbitrarily deciding that the stock market process was a Brownian motion in the log of the share price rather than the price itself.
dd
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