Fischer Black

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table2"> <tr> <td width="780" align="center"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table3"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_mehrling_perry_(2005).jpg" width="133" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table4"> <tr> <td colspan="3" width="0%"> <p class="book_title">Fischer Black<br> <font size="3">And the Revolutionary Idea of Finance</font></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap2"> <area href="../main/ratings.htm" shape="rect" coords="73, 0, 163, 33"> </map> <img border="0" src="../images_title/mehrli33.gif" usemap="#FPMap2" width="178" height="158"></td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table5"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </div> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table6"> <tr> <td width="50%" valign="top"> <p align="left" class="body_expanded"><strong style="font-weight: 400">Fischer Black was somewhat of an enigma in life, and so he remains in this biography. We know him as the co-author of the famous Black-Scholes option pricing formula. Biographer Perry Mehrling fleshes out that perception, but he focuses more on Black's research interests than he does on Black the man. In this regard, the book is very similar to Bernstein's (<a href="../titles/bernstein_p_(1993).htm">1993</a>) <i>Capital Ideas</i>. It magnificently describes researchers and their ideas, tying them together into a unifying narrative. Bernstein is a more expansive book. It covers Black-Scholes theory, but in less detail. I have never read as detailed and enlightening account of the origins of the Black-Scholes formula as the one presented here. Most financial engineering students are unaware that Black-Scholes and CAPM are consistent theories. Not only that, but Black actually derived the Black-Scholes formula from CAPM! Mehrling's treatment of this material is masterful.</strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">Unlike Bernstein, Mehrling does occasionally break down and resort to a formula or two to help the narrative along. I think this is appropriate. The formulas do help, and most readers of this book will be people with some technical expertise.</strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">Of Black the man, we learn the essentials: schools, employers, wives and children. There are some anecdotes and hints of a human side. We learn of his marital troubles and his untimely death due to cancer. For the human struggles these entailed, we mostly have to rely to our imagination. </strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">A considerable portion of the book is devoted to Black's economics research, which mainstream economists never embraced. Mehrling is himself an economist, and he is clearly interested in communicating Black's ideas. This material is presented with the same style and flair as the earlier material on the origins of the Black-Scholes formula, but it is less interesting.</strong></p> </td> <td width="50%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table7"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table8"> <tr> <td class="contents_expanded"> <p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">Prologue: the Price of Risk<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9"> 1. Thou Living Ray of Intellectual Fire<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9"> 2. An Idea in the rough<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">3. Some Kind of an Education<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">4. Living up to the Model<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9"> 5. Tortuous Economic Intuition<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">6. The Money Wars<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">7. Global Reach<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9"> 8. Stagflation<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">9. Changing Fields<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9"> 10. What Do Traders Do?<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">11. Exploring General Equilibrium<p class="contents_compressed" style="margin-top: 9; margin-bottom: 9">Epilogue: Nothing is Constant.</td> </tr> </table> </td> </tr> </table> <p align="left" class="body_expanded"><strong style="font-weight: 400">Why did Black fail at economics? Politics certainly played a role. Black did not have a Ph.D. in economics. He was a practitioner who made his way into academia by virtue of his work on option pricing theory. His economics theories were external to the monetarist debates of the day. Maybe his ideas simply lacked merit. The reader is never in a position to decide, and as the book goes on and on explaining Black's views, most readers will stop caring.</strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">Mehrling's description of Black's days at Goldman Sachs is disappointing. We learn nothing about what it was like to work at Goldman Sachs—the culture, the personalities, the familiar Wall Street greed. Mehrling seems out of his depth describing happenings at a major trading house. He hardly even tries, focusing instead on explaining Black's ideas during the period. The explanations are not as detailed or insightful as the earlier explanations relating to the Black-Scholes formula or Black's economics writings. </strong></p> <p align="left" class="body_expanded"><strong style="font-weight: 400">This book has strengths and weaknesses. The real strength is its treatment of the origins of the Black-Scholes formula. It will keep your attention, but I did catch myself skimming some sections towards the end. If you read biographies to understand people, you will be disappointed. The book is about economic ideas. I think Black would have been pleased.</strong></p> <p align="center" class="body"> </p> </td> </tr> <tr> <td width="50%" valign="bottom"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table9"> <tr> <td width="100%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td width="50%" bgcolor="#FFFFCC" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table11"> <tr> <td> <p class="body" style="margin-bottom: 6"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/history_biography.htm">History - Biography</a></p> <p class="bullet_line_space"><img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/history_histories.htm">History - Histories</a></p> <p class="bullet_line_space"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/markets_industries_derivatives.htm">Markets - Derivatives</a><p class="bullet_line_space"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/financial_engineering_basic.htm">Financial Engineering - Basic Theory</a></td> </tr> </table> </td> <td width="50%" bgcolor="#CCCCFF" align="center" valign="top"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> <td>  </td> </tr> </table> </div>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a><br> <span class="verdana10">books direct link:</span> <a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>