李时珍奇经八脉考Title

HES/AFA New Orleans,Jan.4,20081Pioneers of Financial EconomicsGeoffrey Poitras,Simon Fraser UniversityFranck Jovanovic,Universit du Qubec MontrealHES/AFA New Orleans,Jan.4,20082Finance in AntiquityFinancial Transactions involving the future payment for loans of real goods likely predate the use of common languageEarliest examples of written language the Sumerian cuneiform tablets-deal with financial transactionsCode of Hammurabi(circa 1750 BC/BCE)had explicit and harsh penalties for loan defaultsHES/AFA New Orleans,Jan.4,20083Finance in Medieval TimesReligious restrictions on financial activities especially payment of interest on money loans and compensation for risk bearingEducation of merchants in finance took place largely outside the Church dominated universities in reckoning schools -the Treviso Arithmetic(1478)was a text for such schools.Compound interest calculations were used,if not admitted to,and double entry book keeping was popularized by Fra Luca Pacioli(1445-1514?)HES/AFA New Orleans,Jan.4,20084Fra Luca PacioliHES/AFA New Orleans,Jan.4,20085Finance in ArtAristotelian teachings which dominated scholastic humanism of the Church viewed business activities as banal reflected in lack of attention to business themes in Art from the Reformation to the Enlightenment15th and 16th C.woodcuts of financial activities from Swetz(1987)pale in comparison to Durers Four Horsemen (1498)Until the 18th C.,European artists were concerned with religious themes e.g.,Rembrandt(1633)to Pannini(1750)with Jesus Throwing out the Money LendersHES/AFA New Orleans,Jan.4,20086Finance in LiteratureShakespeares Merchant of Venice(1600)immortalized ShylockJoseph de la Vega Confusion de Confusiones(1688)written in Spanish by a Portuguese Jewish migr living in Amsterdam.Jonathan Swift,Gullivers Travels(1726)and The Bubble(1721),the first two lines:“Ye wise Philosophers explain,What Magick makes our Money Rise?”To Swift,Isaac Newton was a PhilosopherHES/AFA New Orleans,Jan.4,20087The Early History of Financial EconomicsWhere to start the history?What is financial economics?Sophisticated pricing formulae for financial securities developed before Adam Smith(1723-1790)was bornBuilding on work of Christian Huygens(1620-1699),Jan de Witt(1625-1672)solved the price for a life annuityHES/AFA New Orleans,Jan.4,20088Das Neu Adam Smith Problem?HES/AFA New Orleans,Jan.4,20089Pricing of Life AnnuitiesThe total number of annuities sold on a life starting at year x is x x equals the sum of dx+dx+1+.+dw-1 where di is the number of annuities which terminate in period i due to the death of annuitant nominees in that half year di=0 for x w.Taking x+t to be the number of nominees,starting in year x surviving in period x+t,it follows that:dx+t=x+t-x+t+1 and that the probability of death in any given half year j is(dx+j/x).HES/AFA New Orleans,Jan.4,200810From E.Halley to A.de MoivreHalley(1693)is a founding work of actuarial science,demography and financial economics.His tabular solution to the life annuity value was“the short Result of a not ordinary number of Arithmetical Operations”Abraham de Moivre(1667-1754),a giant in mathematical statistics,refined and substantively extended the solution to the life annuity valuation problem.Assuming arithmetically declining survival probabilities,de Moivre showed that the value of a life annuity(EAn)can be closely approximated by the formula:HES/AFA New Orleans,Jan.4,200811The Growth of Stock TradingInitial trading in(joint)stock usually traced back to 1602 with the VOC(Dutch East India Company)in Amsterdam recounted in de la Vega(1688)limited number of securities tradedDramatic emergence of stock trading in England starting in 1690s South Sea Bubble and Mississippi Scheme(1719-1721)founding of London Stock Exchange building in 1773Emergence of old Finance with Thomas Mortimer Everyman his Own Broker(1761)HES/AFA New Orleans,Jan.4,200812The Reverend Richard Price(1723-91)A dissenting(non-Anglican)English ministerIntellectual giant of the 18th C.Observations on Reversionary Payments(1776)the founding work of modern insurance mathematics took mathematical contributions of de Moivre and applied to problems of insurance and social security design father of modern public pension plans the first actuary(at the Equitable)Essential contributions to political science(Give me liberty or give me death),mathematical statistics(responsible for post-humus publication of Bayes Theorem),philosophy(moral pragmatism)and religious studies(use of Bayes theorem against David Humes argument against miracles).HES/AFA New Orleans,Jan.4,200813Philosophy of Financial EconomicsJules Regnault(1834-1894)and the social physics project from Adolph Quetelet(1796-1874)Henri Lefvre(1827-1885)and the unity of science project from Auguste Comte(1798-1857)HES/AFA New Orleans,Jan.4,200814Henri Lefvres analogies between financial markets and human bodyStock markets(heart)Government(brain)Speculation(nervous system)Options(cardiovascular valve)Goods and services(blood)HES/AFA New Orleans,Jan.4,200815Efficiency from the division of laborProducersWholesalersBrokersRetailersconsumersspot marketsFutures+optionsFutures+spot marketsFutures+spot marketsspot marketsHES/AFA New Orleans,Jan.4,200816A graphic method to led financial market more efficientCall option with a 25c premiumCombination of two options(call and put)HES/AFA New Orleans,Jan.4,200817Example of complex strategyHES/AFA New Orleans,Jan.4,200818Jules Regnault and Adolph Quetelets social physics projectJules Regnault(1834-1894):French broker“unity of science”and the university of the normal law(also called the law of errors)First author to create the random walk modelHES/AFA New Orleans,Jan.4,200819Adolphe Qutelet and the social physicsthe universality of the law of errors:physical phenomena and moral phenomena HES/AFA New Orleans,Jan.4,200820Example of the use of the“unity of science”HES/AFA New Orleans,Jan.4,200821Foundations of mathematical financeLouis Bachelier(1870-1946)