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A brief history of mathematics in finance

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  • Erdinc Akyildirim
  • Halil Mete Soner

Abstract

In the list of possible scapegoats for the recent financial crises, mathematics, in particular mathematical finance has been ranked, without a doubt, as the first among many and quants, as mathematicians are known in the industry, have been blamed for developing and using esoteric models which are believed to have caused the deepening of the financial crisis. However, as Lo and Mueller (2010) state “Blaming quantitative models for the crisis seems particularly perverse, and akin to blaming arithmetic and the real number system for accounting fraud.” Throughout the history, mathematics and finance have always been in a close relationship. Starting from Babylonians, through Thales, and then Fibonacci, Pascal, Fermat, Bernoulli, Bachelier, Wiener, Kolmogorov, Ito, Markowitz, Black, Scholes, Merton and many others made huge contributions to the development of mathematics while trying to solve finance problems. In this paper, we present a brief historical perspective on how the development of finance theory has influenced and in turn been influenced by the development of mathematical finance theory.

Suggested Citation

  • Erdinc Akyildirim & Halil Mete Soner, 2014. "A brief history of mathematics in finance," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 14(1), pages 57-63, March.
    • Handle: RePEc:bor:bistre:v:14:y:2014:i:1:p:57-63
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    Cited by:

    1. Ilya Slobodnyak & Anatoly Sidorov, 2022. "Time Value of Money Application for the Asymmetric Distribution of Payments and Facts of Economic Life," JRFM, MDPI, vol. 15(12), pages 1-10, December.

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