CAPITAL IDEAS- by Peter Bernstein: aka Giants of FE

From Gown to Town...

I am currently reading this really nice book on the origins of modern wall street. Turns out this book is required reading for an MFE class as well. Extremely well written and chock full of accounts on the development of modern day finance.

I liked the story about the father of modern day finance - an unknown mathematician at the turn of the century - Louis Bachelier. It turns out that this guy had worked out the mathematics behind brownian motion a couple of years before Einstein did. Quite interesting...

Next giant in the history of modern finance - a 25 year old graduate student at the University of Chicago - Harry Markowitz, who literally laid the foundations for modern day portfolio management. Markowitz made a tremendous leap in the way we quantify risk and return - he formalized two age old adages - "Dont put all your eggs in one basket" (Diversification) and "Nothing ventured Nothing gained" (Risk vs. Return)., into an elegant mathematical framework.

To be contd (Black and Scholes, and OTHERS..)...