Here is an interesting take on the formula from The Black Swan by Nassim Taleb: > Things got a lot worse in 1997. The Swedish academy gave another round of Gau

Here is an interesting take on the formula from The Black Swan by Nassim Taleb: > Things got a lot worse in 1997. The Swedish academy gave another round of Gaussian-based Nobel Prizes to Myron Scholes and Robert C. Merton, who had improved on an old mathematical formula and made it compatible with the existing grand Gaussian general financial equilibrium theories—hence acceptable to the economics establishment. The formula was now “useable.” It had a list of long forgotten “precursors,” among whom was the mathematician and gambler Ed Thorp, who had authored the bestselling Beat the Dealer, about how to get ahead in blackjack, but somehow people believe that Scholes and Merton invented it, when in fact they just made it acceptable. The formula was my bread and butter. Traders, bottom-up people, know its wrinkles better than academics by dint of spending their nights worrying about their risks, except that few of them could express their ideas in technical terms, so I felt I was representing them. Scholes and Merton made the formula dependent on the Gaussian, but their “precursors” subjected it to no such restriction. /.../ > And the option formula went on bearing the name Black-Scholes-Merton, instead of reverting to its true owners, Louis Bachelier, Ed Thorp, and others.