Pricing the Future.

Economists (Management)
Economists (Services)

Holbrook, Emily

01/01/2012

Name: Risk Management Publisher: Risk Management Society Publishing, Inc. Audience: Trade Format: Magazine/Journal Subject: Business; Human resources and labor relations; Insurance Copyright: COPYRIGHT 2012 Risk Management Society Publishing, Inc. ISSN: 0035-5593

Date: Jan-Feb, 2012 Source Volume: 59 Source Issue: 1

Event Code: 200 Management dynamics; 360 Services information Computer Subject: Company business management

Product Code: 8525201 Economists NAICS Code: 54172 Research and Development in the Social Sciences and Humanities

Named Person: Szpiro, George G.; Szpiro, George G.

Geographic Scope: United States Geographic Code: 1USA United States

279613635

PRICING THE FUTURE

By George G. Szpiro

[ILLUSTRATION OMITTED]

One of the most important things I learned while taking upper-level college finance courses was the BlackScholes option pricing model. The complex formula, created by Fisher Black and Myron Scholes in 1973, earned Scholes a 1995 Nobel Prize in economics (Black was ineligible for the prize due to his death in 1995), spawned the popularity of derivatives trading and helped usher in the housing bubble and subsequent banking meltdown. Almost all of the modern, complex financial models are based on some variation of the same quantitative methods used in the Black-Scholes model.

The history of this powerful mathematical formula may seem like a snooze-fest to most. But author George Szpiro has a gift for turning the potentially mind-numbing into a historical journey-from Holland's tulip craze of the 1630s to Paris Bourse of the late 1800s and beyond. Szpiro, a mathematician, financial economist and (quite talented) journalist, covers how Black and Scholes borrowed physics formulas describing the random movement of atoms, then applied these concepts to volatile stock prices. It's the story of how two intellectuals combined concepts from Einstein, science, history and mathematics to develop one of the major mathematical achievements of the 20th century.

Szpiro doesn't write solely for the market-minded; he writes for the layman, hoping everyone will find this topic as interesting as he does. By incorporating clear verbiage, clever vignettes and to-the-point explanations complete with interesting historical references, Pricing the Future makes for a fascinating account of not only the Black-Scholes option pricing model, but of modern finance in general.

Some in the industry praise the model for advancing the discipline while others despise the concept for its role in the great recession. Whatever side of the fence you stand on, this book offers an enthralling historical account of a formula that changed the world forever.

Copyright 2012 Gale, Cengage Learning. All rights reserved.

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