Fischer Black and the Revolutionary Idea of Finance
Besides revolutionizing finance with the Black-Scholes option pricing model, Fischer Black forever changed Wall Street by developing what is now known as quantitative finance. Fischer Black and the Revolutionary Idea of Finance explores Black's intellectual journey from Harvard to the offices of ADL, from the University of Chicago to MIT, and then to Goldman Sachs. This poignant book tells the story of one man's intellectual adventure at the very center of modern finance, fully describing the birth of quantitative finance and financial engineering along the way.
- Years of research and interviews with Black's business and academic associates, as well as family and friends, are distilled into a scholarly yet personal story of the formation and development of the extraordinary mind and unique character of this unassuming renegade
- Black deciphered the universe of modern finance in ways that went underappreciated for many years and would have won the Nobel Prize in Economics, if not for his untimely death in 1995
- Author Perry Mehrling weaves Black's personal story with the birth of modern finance into a vignette-based business biography that captures the essence of this extraordinary man, explaining, for the first time, the ground-breaking impact Fischer Black had on the worlds of money and finance as well as world markets
This compelling biography of the "Einstein of Finance" follows Fischer Black through his incredible career, from his transition from academia to one of the most elite of firms on Wall StreetGoldman Sachswhere he developed quantitative models that tens of thousands of professionals still use today. Fischer Black and the Revolutionary Idea of Finance demystifies this genius of finance and provides an engaging and entertaining look at a man whose life's work encapsulates modern financial theory.
Prologue The Price of Risk 1
ONE Thou Living Ray of Intellectual Fire 23
TWO An Idea in the Rough 49
THREE Some Kind of an Education 73
FOUR Living Up to the Model 99
FIVE Tortuous Economic Intuition 119
SIX The Money Wars 139
SEVEN Global Reach 165
EIGHT Stagflation 189
NINE Changing Fields 215
TEN What Do Traders Do? 231
ELEVEN Exploring General Equilibrium 255
Epilogue Nothing Is Constant 283
Appendix A A Financial Notes Chronology 299
Appendix B A Newsletter Chronology 301
- The author is Associate Professor of Economics at Barnard College of Columbia University and department chair.
- The stroy of a giant in the history of modern finance. This book is nothing short of a major literary event in finance and investment publishing. In the narrative tradition of Genius (about physicist Richard Feynman), this will be the compelling biography of the "Einstein of Finance", Fischer Black. It weaves his personal story with the birth of modern finance into a vignette-based business narrative that is completely unique.
- A perfect sequel to Peter Bernstein's Against the Gods and Capital Ideas. Published in 1992, Capital Ideas traced the origins of modern finance by telling the story of the Capital Asset Pricing Model. Bernstein followed this with a history of risk and its impact on financial markets. This Fischer Black book continues the story of modern finance where Bernstein's left off, explaining the ground-breaking impact that Black had in the world of finance and markets.
- Personalizes modern financial theory. On the back of the Nobel Prize-winning work of Fischer Black, Myron Scholes, and Robert Merton, has come the financial derivatives industry, which trades trillions of dollars each year. The book tells the dramatic story of how this came to be.
“a rigorous but rewarding biography” (CFO Europe, October 2005)
“highly readable” (Benefits & Compensation International, October 2005)
"...well-researched...recommended..." (Accounting Technician, September 2005)
"The story of Fischer Black...is remarkable both because of the creativity of the man and because of the revolution he brought to wall Street.… Mehrling's book is fascinating..." (Financial Times, 12th September 2005)
“…recommended as readable to those with the intellectual curiosity to pursue financial theory…” (The Independent, 30 July 2005)
“… a vignette-based business biography that captures the essence of this extraordinary man…engaging and entertaining…” (Credit Control Journal, July 2005)
In a 30-year career equally divided between academics (University of Chicago) and Wall Street, Black contributed seminal papers in almost every area of finance and many areas of economics, but few were published in major peer-reviewed journals and many were never published at all. He spent most of his time alone in a room thinking and writing, was uncomfortable in large groups, an undistinguished lecturer and famously eccentric in ways more irritating than amusing or dramatic. All of this gives Barnard economist Mehrling (The Money Interest and the Public Interest) his work cut out for him. He has responded with a book that, beyond providing the facts of Black's life, serves as the best currently available general history of the revolution in finance that took place between 1960 and 1990: the essential ideas and disputes are explained clearly, with a minimum of mathematics and jargon, and the relationships among the leading innovators are explored concisely but in depth. As far as Black goes, Mehrling gives a clear picture of his working life and reveals the strong family ties and close personal friendships of a man often thought to have been emotionless. On the whole, Mehrling's book is essential reading for anyone interested in the development of modern finance or the life of an idiosyncratic creative genius. (July) (Publishers Weekly, June 6, 2005)
"A fascinating history of things we take for granted in our everyday financial lives." (The New York Times)
"[Fischer Black and the Revolutionary Idea of Finance] does an exceptional job of capturing Black’s spirit and gives an insightful inside account of the academic financial revolution." (Global Association of Risk Professionals magazine)
"Mehrling skillfully interweaves the stories of Black's career, his sometimes-difficult personal life, and his contributions to finance and to economics . . . In telling the story of Black's life, Mehrling casts light on a crucial, underappreciated aspect of the making of our current world."-Science magazine
"Excellent new biography of Fischer Black, one of the great innovators of modern finance theory. . . Mehrling also provides an engaging history of the development of quantitative finance and a solid introduction to some of its central concepts."--Region Focus, Fall 2005
"By unearthing Black's personal story, Mehrling conjures a unique glimpse into the context in which "the Einstein of finance" viewed liquidity, risk, capital, business cycles -- the world's entire economic equilibrium. Once inside the mind of Black, you may never look at the market the same way again." --Trader Monthly magazine
"Besides being a splendid account of the early and great years of the development of Finance as an academic discipline, and a fascinating biography of an extraordinary but difficult genius, this book made me think and reflect more than almost any other book."--Journal of the History of Economic Thought
"...Wit and insight" ( Financial Management, December 2006)