Louis Bachelier

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Louis Bachelier
Louis Bachelier, aged 15
Louis Bachelier, aged 15
Born March 11, 1870
Le Havre, France
Died April 28, 1946 (aged 76)
Saint-Servan-sur-Mer, France
Residence France
Citizenship French
Fields Mathematics
Mathematical Finance
Institutions La Sorbonne
Université de Franche-Comté (Besançon)
Université de Dijon
Université de Rennes
Alma mater La Sorbonne
Known for PhD thesis on Mathematical Finance

Louis Jean-Baptiste Alphonse Bachelier (March 11, 1870 - April 28, 1946)[1] was a French mathematician at the turn of the 20th century. He is credited with being the first person to model Brownian motion, which was part of his PhD thesis The Theory of Speculation, (published 1900).

His thesis, which discussed the use of Brownian motion to evaluate stock options, is historically the first paper to use advanced mathematics in the study of finance. Thus, Bachelier is considered a pioneer in the study of financial mathematics and stochastic processes.

Contents

[edit] Early years

Bachelier was born in Le Havre. His father was a wine merchant and amateur scientist, and the vice-consul of Venezuela at Le Havre. His mother was the daughter of an important banker (who was also a writer of poetry books). Both of Louis' parents died just after he completed his bachelor's degree, forcing him to take care of his sister and three-year-old brother and to assume the family business, which effectively put his graduate studies on hold. During this time Bachelier gained a practical acquaintance with the financial markets. His studies were further delayed by military service. Bachelier arrived in Paris in 1892 to study at the Sorbonne, where his grades were less than ideal.

[edit] The Thesis

Historians argue Bachelier's thesis was not appropriately received, resulting in Academia blackballing. However, his instructor, Henri Poincaré is recorded to have given some positive feedback (though socially insufficient for finding an immediate teaching position in France at that time). For example, Poincaré called his approach to deriving Gauss' law of errors

“ very original, and all the more interesting in that Fourier's reasoning can be extended with a few changes to the theory of errors. ... It is regrettable that M. Bachelier did not develop this part of his thesis further. ”

The thesis received a note of honorable, and was accepted for publication in the prestigious Annales Scientifiques de l’École Normale Supérieure. The fact that it did not receive a mark of très honorable, despite its ultimate importance, is still interpreted as an appreciation for his contribution. Jean-Michel Courtault et al. point out in "On the Centenary of Theorie de la Speculation" that honorable was "the highest note which could be awarded for a thesis that was essentially outside mathematics and that had a number of arguments far from being rigorous." Positive feedback from Poincaré can be attributed to the mathematician's interest in mathematical ideas, not just rigorous proof. "Poincare: un intuitif Character"

[edit] Academic career

For several years following the successful defense of his thesis, Bachelier further developed the theory of diffusion processes, and was published in prestigious journals. In 1909 he became a "free professor" at the Sorbonne. In 1914, he published a book, Le Jeu, la Chance, et le Hasard (Games, Chance, and Risk), that sold over six thousand copies. With the support of the Council of the University of Paris, Bachelier was given a permanent professorship at the Sorbonne, but World War I intervened and Bachelier was drafted into the French army as a private. After the war, he found a position in Besançon, replacing a regular professor on leave. When the professor returned in 1922, Bachelier replaced another professor at Dijon. He moved to Rennes in 1925, but was finally awarded a permanent professorship in 1927 at Besançon, where he worked for 10 years.

Besides the setback that the war had caused him, Bachelier was blackballed in 1926 when he attempted to receive a permanent position at Dijon. This was due to a misinterpretation of one of Bachelier's papers by Professor Paul Pierre Lévy, who—to Bachelier's understandable fury—knew nothing of Bachelier's work, nor of the candidate that Lévy recommended above him. Lévy later learned of his error, and reconciled himself with Bachelier.

Also notable is that Bachelier's work on random walks predated Einstein's celebrated study of Brownian motion by five years.

[edit] Works

Also published as a book, Bachelier 1900b
Republished in a book of combined works, Bachelier 1995
Translated into English, Cootner 1964, pp. 17-78
Translated into English with additional commentary and background, Bachelier et al. 2006
Republished in a book of combined works, Bachelier 1995
Republished, Bachelier 1992
Republished, Bachelier 1993
Erraturm, Bachelier 1941b

[edit] See also

[edit] Citations

  1. ^ Felix 1970, pp. 366-367

[edit] References

  • Bachelier, L. (1900b), Théorie de la spéculation, Gauthier-Villars 
  • Bachelier, L. (1906), “Théorie des probabilités continues”, Journal de Mathématiques Pures et Appliquées 6 (2): 259-327 
  • Bachelier, L. (1908a), “Étude sur les probabilités des causes”, Journal de Mathématiques Pures et Appliquées 6 (4): 395-425 
  • Bachelier, L. (1908b), “Le problème général des probabilités dans les épreuves répétées”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 25 Mai 1908 (146): 1085–1088 
  • Bachelier, L. (1910b), “Mouvement d’un point ou d’un système matériel soumis à l’action de forces dépendant du hasard”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 14 Novembre 1910, présentée par M.H.Poincaré (151): 852-855 
  • Bachelier, L. (1913a), “Les probabilités cinématiques et dynamiques”, Annales Scientifiques de l’École Normale Supérieure 30: 77-119 
  • Bachelier, L. (1913b), “Les probabilités semi-uniformes”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 20 Janvier 1913, présentée par M.Appell (156): 203-205 
  • Bachelier, L. (1914), Le Jeu, la Chance et le Hasard, Bibliothèque de Philosophie scientifique, E. Flammarion 
  • Bachelier, L. (1915), “La périodicité du hasard”, L’Enseignement Mathématique 17: 5-11 
  • Bachelier, L. (1920a), “Sur la théorie des corrélations”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 7 Juillet 1920 (48): 42-44 
  • Bachelier, L. (1920b), “Sur les décimales du nombre π”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 7 Juillet 1920 (48): 44-46 
  • Bachelier, L. (1923), “Le problème général de la statistique discontinue”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 11 Juin 1923, présentée par M.d’Ocagne (176): 1693-1695 
  • Bachelier, L. (1937), Les lois des grands nombres du Calcul des Probabilités, Gauthier-Villars 
  • Bachelier, L. (1938), La spéculation et le Calcul des Probabilités, Gauthier-Villars 
  • Bachelier, L. (1939), Les nouvelles méthodes du Calcul des Probabilités, Gauthier-Villars 
  • Bachelier, L. (1941a), “Probabilités des oscillations maxima”, Comptes-rendus des Séances de l’Académie des Sciences Séance du 19 Mai 1941 (212): 836-838 
  • Bachelier, L. (1941b), “Probabilités des oscillations maxima (Erratum)”, Comptes-rendus des Séances de l’Académie des Sciences (no. 213): 220 
  • Bachelier, L. (1992), Reprint of Calcul des probabilités (1912), vol. 1, Editions Jacques Gabay, ISBN 287647090X 
  • Bachelier, L. (1993), Reprint of Le Jeu, la Chance et le Hasard (1914), Editions Jacques Gabay, ISBN 2876471477 
  • Bachelier, L. (1995), Combined volume prints of Théorie de la spéculation (1900b) and Théorie mathématique du jeu (1901), Editions Jacques Gabay, ISBN 2876471299 
  • Bachelier, L.; Samuelson, P. A.; Davis, M. & Etheridge, A. (2006), Louis Bachelier's Theory of Speculation: The Origins of Modern Finance, Princeton NJ: Princeton University Press, ISBN 9780691117522 
  • Cootner, P.H. (ed.) (1964), The Random Character of Stock Market Prices, Cambridge, MA: MIT Press 

[edit] External links


Persondata
NAME Bachelier, Louis
ALTERNATIVE NAMES
SHORT DESCRIPTION Mathematician
DATE OF BIRTH March 11, 1870
PLACE OF BIRTH Le Havre, France
DATE OF DEATH April 28, 1946
PLACE OF DEATH Saint-Servan-sur-Mer, France