“In [Bachelier’s] paper we find the Chapman-Kolmogorov-Smoluchowski equation for continuous stochastic processes, the derivation of the Einstein-Wiener Brownian motion process and the recognition that this process is a solution of the partial differential equation for heat diffusion. The Einstein-Wiener process is the analogue, for continuous time and continuous random variables, of the discrete random walk process. … Most of this theory was later to be developed by the mathematicians who were transforming probability theory into a rigorous discipline, Levy, Kolmogorov, Borel, Khinchine, and Feller. Compared to these standards of rigor, Bachelier’s work was heuristic, and scorn for the heuristics led to an underestimation by contemporaries of the significance of the contributions.” (p. 3)That's via a post at Brenda Jubin's blog on the literature of investing, Reading the Markets:
-Cootner, The Random Character of Stock Market Prices, II
This morning she's published her final post on Cootner:
Today I conclude my series of posts on Paul Cootner’s classic book with some excerpts from his brief introduction to Part IV, “The Statistical Analysis of Option Prices.” Don’t forget that the articles in this section were written before the Black-Scholes pricing model was developed (1973)....
