Celebrating Bachelier
Thursday, March 1, 2012 at 10:26AMBachelier, LLC is the name of my latest trading venture. I named the company after Louis Bachelier who was a French mathematician at the turn of the 20th century. He is credited with being the first person to model the stochastic process now called Brownian motion, which was part of his PhD thesis The Theory of Speculation, (published 1900). Bachelier's work on random walks predated Einstein's celebrated study of Brownian motion by five years (source here: Wikipedia). Read it, it is a fascinating story.
Bachelier's Brownian motion is the core mathematic concept behind options pricing and Monte Carlo simulations; the core mathematic concept behind modern finance.
Bachelier, LLC is a trading platform. As such it is a platform of trading experiments performed by human beings with the help of computers.
We are fascinated by the different forces influencing a stock price such as the statistical nature of its historical price, its Brownian motion profile (volatility), and the evolution of the intrinsic value of the underlying company. These forces and other forces drive the stock price at different time scales and the pulls create opportunities.
Then there is the interaction of time and people on these systems. People operating in a world in which information is getting almost perfect and free with friction decreasing rapidly. Not only that, with the advent of Twitter, we now have a global human network influencing the system as well.
We are learning about all this but we are far from understanding it very well. What do you think?
Written by Michael Bigger. Follow me on Twitter and StockTwits.
Reader Comments (1)
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