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Pricing the Future: Finance, Physics, and the 300-year Journey to the Black-Scholes Equation by George Szpiro

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TWO
In the Beginning
ON SEPTEMBER 24, 1724, KING LOUIS XV DECREED THE creation of a stock exchange, the Paris Bourse. It was a last ditch effort by the monarch (or rather the fourteen-year-old monarch’s advisers and handlers) to put France’s badly stricken finances in order. Due to the extravagance of Louis’s predecessor, his great-grandfather Louis XIV, and his own advisors’ mismanagement, the country found itself burdened with a horrendous debt. Everything was in disarray. The failed attempts by the Scotsman John Law to clean up this mess rendered the situation even worse.1
In 1694 Law had narrowly escaped a death sentence in England for fighting and winning a duel. The dashing twenty-three-year-old had shot and killed his opponent, a duped ...

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