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Some key events in the history of quantitative finance

1952: Harry Markowitz, an economist at the University of Chicago, develops Modern Portfolio Theory, which holds that diversification can reduce risk.

1964: William Sharpe publishes a paper outlining the Capital Asset Pricing Model (CAPM), separating systemic risk, which affects all securities, from asset-specific risk.

1973: Robert Merton publishes a framework for an options pricing model, later referred to as “Black Scholes”.

1987: Some blame computerized, or “program trading”, for exacerbating the severity and speed of the stock market’s precipitous decline on October 19th.

1994: Hedge fund Askin Capital Management loses $420 million on bad bets on CMO’s (collateralized mortgage obligations).

1995: Carnegie-Mellon University introduces a Master of Science in Computational Finance program. Many other universities follow with similar programs.

1997: Robert Merton and Myron Scholes win the Nobel Prize in Economics.

1998: Long Term Capital Management, a hedge fund founded by John Merriwether with Scholes as a partner loses $4.6 billion in derivatives after the Russian financial crisis.


  1. Quant funds including Renaissance Technologies and Goldman Sachs’ Global Alpha Fund suffer large losses as the credit crisis worsens.
  2. Nassim Taleb assails modern portfolio theory in an op-ed in the Financial Times, saying it does not factor in the possibility of rare events.

2008: Financial crisis and recession strike the world economy.

For more, see Reuters Online