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.
- Quant funds including Renaissance Technologies and Goldman Sachs’ Global Alpha Fund suffer large losses as the credit crisis worsens.
- 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