In 1973, Fischer Black and Myron Scholes published their groundbreaking paper the pricing of options and corporate liabilities. Not only did this specify the first successful options pricing formula, but it also described a general framework for pricing other derivative instruments. That paper launched the field of financial engineering. Black and Scholes had a very hard time getting that paper published. Eventually, it took the intersession of Eugene Fama and Merton Miller to get it accepted by the Journal of Political Economy.
In 1997, they got the Nobel Prize for their path breaking research connecting Mathematics to markets, in their quest to tame the risk and price the future..
The failure of world wide financial markets in 2008 is in part nothing but a failure of this much renowned and acclaimed application of Mathematics to the markets.. It just goes to prove beyond any doubt that quest to tame the risk and price the future is far from over ..
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