Louis Bachelier was a French mathematician who pioneered the modern theory of probability applied to finance. His 1900 thesis on stock market speculation introduced Brownian motion before Einstein, founding the field of financial mathematics.
Louis Bachelier(1870 — 1946)
Louis Bachelier
France
5 min read
Frequently asked questions
Key Facts
- Born on March 11, 1870, in Le Havre; died on April 28, 1946, in Saint-Servan-sur-Mer
- In 1900, defended his thesis “The Theory of Speculation,” supervised by Henri Poincaré
- Modeled Brownian motion as early as 1900, five years before Einstein's work (1905)
- Professor at the universities of Besançon, Dijon, and Rennes
- His work was rediscovered in the 1950s–1970s and inspired the Black-Scholes model (1973)
Works & Achievements
Founding thesis of mathematical finance: it models stock market prices as a random motion, anticipating Brownian motion.
A study extending his research on chance and probability applied to gaming situations.
A landmark treatise that systematizes his ideas on continuous random processes, well ahead of its time.
A popular-science work that makes the mathematical laws of chance accessible to the general public.
An article linking the calculus of probabilities to the study of motion, sketching out the theory of stochastic processes.
The central idea of his thesis, rediscovered in the 1950s and now the foundation of the modern model for pricing financial options.
Anecdotes
In 1900, Louis Bachelier defended a doctoral thesis at the Sorbonne titled “Theory of Speculation”: for the first time, a mathematician used probability to describe the fluctuations of prices on the Paris Stock Exchange. His advisor, the great Henri Poincaré, was intrigued but considered the subject too far removed from classical mathematics.
Bachelier described the random movement of prices five years before Albert Einstein published his famous study on the Brownian motion of particles in 1905. The two men, without knowing each other, had described the same mathematics of chance — one for the stock market, the other for atoms.
His thesis received only the grade of “honorable” rather than “very honorable,” which hampered his academic career. Working on money and speculation was considered rather unworthy of a mathematician at the time.
Bachelier had a difficult career, moving from one precarious position to another in Besançon, Dijon, and Rennes. In 1926, a misreading of one of his works by other mathematicians nearly cost him a post in Dijon.
It was not until the 1950s, long after his death, that the American economist Paul Samuelson rediscovered Bachelier's forgotten thesis and brought it to the world's attention, making him the recognized father of financial mathematics.
Primary Sources
The mathematical expectation of the speculator is zero.
The influences that determine the movements of the Stock Exchange are countless; past, present, and even anticipated events are reflected in its prices.
The calculus of probabilities aims to measure the likelihood of events.
Chance, a word that seems to exclude all law, is nevertheless governed by precise laws that calculation can reach.
Key Places
Port city in Normandy where Louis Bachelier was born in 1870, into a family of wine merchants. The family business gave him an early familiarity with the world of commerce.
University where Bachelier studied and then defended his thesis in 1900 before Henri Poincaré. He would later teach the calculus of probabilities there.
Financial marketplace whose price fluctuations inspired all of Bachelier's work. There he observed the “speculation” he sought to model.
Institution where Bachelier finally obtained a full professorship in 1927, after years of precarious posts in the provinces.
Seaside town in Brittany where Louis Bachelier died in 1946, still almost unknown to the wider scientific public.
Typical Objects
Slate surface on which Bachelier wrote equations and probability diagrams in front of his students. The everyday tool of the mathematics teacher.
Printed sheet listing the prices of quoted securities each day. Bachelier studied it to model the random fluctuations of prices.
Handwritten notebook of the “Theory of Speculation,” penned by hand. The first text to apply probability theory to financial markets.
Common writing instruments of the Belle Époque mathematician, used to fill pages with calculations. Indispensable before the typewriter.
Printed collection of numerical values allowing long calculations to be performed quickly before calculators existed. A basic tool of the mathematician and the actuary.
Games of chance that Bachelier used as concrete examples in his lectures and in his book “Games, Chance and Risk.” Simple models of measurable randomness.
School Curriculum
Vocabulary & Tags
Key Vocabulary
Daily Life
Morning
Bachelier devoted his mornings to mathematical research, filling his notebooks with equations in pen. During teaching terms, he prepared his lectures on the calculus of probabilities to deliver at the university.
Afternoon
In the afternoon, he gave his lessons at the blackboard before students or carried on with his calculations. A reserved man, he rarely frequented the fashionable circles of the great Parisian mathematicians.
Evening
In the evening, he read treatises on mathematics and physics, or reflected on the connections between chance, gambling and motion. His modest life as a provincial professor left little room for socialising.
Food
His table was that of a French academic in the first half of the 20th century: simple meals of bread, soup, meat or fish and table wine. Born into a family of wine merchants, he probably enjoyed a good vintage.
Clothing
He wore the dark three-piece suit of the teacher of the era: jacket, waistcoat, stiff-collared shirt and tie. Formal dress was the rule for a university professor.
Housing
Bachelier lived in modest lodgings as his successive posts took him to Paris and then the provinces (Besançon, Dijon, Rennes). His scattered career forced him to move frequently, without any truly stable home.
Historical Timeline
Period Vocabulary
Liens externes & ressources
Références
Œuvres
Théorie de la spéculation
1900
Théorie mathématique du jeu
1901
Calcul des probabilités
1912
Le Jeu, la Chance et le Hasard
1914
Les Probabilités cinématiques et dynamiques
1913
Concept du mouvement brownien appliqué à la finance
1900
