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.

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.

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

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"

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.

Works

• , Théorie de la spéculation

Also published as a book,

Republished in a book of combined works,

Translated into English,

Translated into English with additional commentary and background,

• , Théorie mathématique du jeu

Republished in a book of combined works,

• , Théorie des probabilités continues
• , Étude sur les probabilités des causes
• , Le problème général des probabilités dans les épreuves répétées
• , Les probabilités à plusieurs variables
• , Mouvement d?un point ou d?un système matériel soumis à l?action de forces dépendant du hasard
• , (Book) Calcul des probabilités

Republished,

• , Les probabilités cinématiques et dynamiques
• , Les probabilités semi-uniformes
• , (Book) Le Jeu, la Chance et le Hasard

Republished,

• , La périodicité du hasard
• , Sur la théorie des corrélations
• , Sur les décimales du nombre {\pi}
• , Le problème général de la statistique discontinue
• , Quelques curiosités paradoxales du calcul des probabilités
• , (Book) Les lois des grands nombres du Calcul des Probabilités (Book)
• , (Book) La spéculation et le Calcul des Probabilités
• , (Book) Les nouvelles méthodes du Calcul des Probabilités
• , Probabilités des oscillations maxima

Erraturm,

See also

• Black-Scholes
• Martingale
• Random walk
• Brownian Motion
• Henri Poincaré

Citations

References

• Philip Ball, Critical Mass Random House, 2004 ISBN 0-09-945786-5, pp238-242.

External links

• "Bachelier Finance Society"
• "Louis Bachelier, fondateur de la finance mathématique" Louis Bachelier webpage at the Université de Franche-Comté, Besançon / France. Text in French.

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