Black-Scholes

The following is part of an answer Edward Thorp gave in a recent interview with the *Journal of Investment Consulting*:

"...* in 1969 I had this options formula, this tool that nobody else had, and I felt an obligation to the [investors in my hedge fund] to basically be quiet about it. The tool was just an internal formula that was known to me and a few other people that I employed. Time passed, and Black and Scholes (1973) published this formula. I remember getting a pre-publication copy in the mail with a letter from Fisher Black saying that he and Scholes were admirers of my work and that they had taken the delta hedging idea of my book Beat the Market (1969) one step further by assuming there was no arbitrage and that this paper presented what they came up with. I thought that this formula had to be the same as what I was running on my computers then, so I plugged it in and drew a graph. However, the graph didn't agree with the graph that I had drawn from my formula, and I [then] realized that I had three formulas, not [just] one. One of the formulas was the Black-Scholes model... I published all three formulas about two or three months later. I was scheduled to give a talk... and I needed something to talk about, so -- almost the same day I received the Black-Scholes paper -- I just wrote up my three formulas and sent them in at that point, knowing that this was no secret any more (Thorp 1973). *

(Source: Â Journal of Investment Consulting, Vol. 12, No. 1, pp. 5-14, 2011)

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Offering another point of view is author Aaron Brown:

"Ed did not wait for public options trading in 1973; he began buying and selling warrants (options issued directly by corporations rather than by created exchanges) in the 1960s. He applied the same principles of careful mathematics and controlled risk taking to the market as he had to blackjack and has compiled an unequaled 40-year track record of high-return, low-risk investing.

(Source: The Poker Face of Wall Street (Wiley 2006), Author: Aaron Brown)