On the Application of the Continuous-Time Theory of Finance to Financial Intermediation and Insurance

Abstract

I In analyzing the problem of option pricing, Bachelier derives much of the mathematics of probability diffusions, and this, five years before Einstein's famous discovery of the mathematical theory of Brownian motion.What financial economist doesn't relish the thought of the great intellectual debt owed to this early option-pricing theorist by the mathematical physicists and probabilists?However, because Bachelier dedicates his thesis to Henri Poincaré, there may be more to the story.