A New Anecdote of Antiquity in the History of Computational Finance John A. Dobelman Department of...

A New Anecdote of Antiquity in the History of Computational Finance

John A. Dobelman

Department of StatisticsRice University

September 20, 2004

New Anecdote(Fr., from Greek anekdota, unpublished items)

History"There has been much discussion as to

whether history should not henceforth be treated as a branch of science rather than of

literature“ – T.Roosevelt, 1912

Computational Finance“Difficult electronic calculations involving

money” – D. Senft, 2002

James R. Thompson, Noah Harding Professor of Statistics, Rice University

Dexter Senft, Managing Director, Lehman Brothers, Inc.

William Goetzmann, Yale School of Management, International Center for Finance, National Bureau of Economic Research (NBER)

Canonical Milestone/Anecdote

1912 - Women Computers widely used at Harvard College Observatory


1877-1900 Louis Bachelier, partially based on Charles Castelli’s “The Theory of Options in Stocks and Shares,” opens door for the Gaussian solution:

1877-1900 Castelli and Bachelier


1623 - First adding machine is made by Wilhelm Schickard


1623 - First adding machine is made by Wilhelm Schickard

1570 - Forwards begin trading on London’s Royal Exchange

1200 - Modern version of the abacus appears in China


B.C. 500 - Counting boards used by Babylonians (The Salamis Tablet)



B.C. 600 - Greece. “First” option contracts (Thales the Milesian and olive presses)


B.C. 600 - Greece. “First” option contracts (Thales the Milesian and olive presses)

B.C. 1700 - Egypt. “First” commodities hedge (Ge. 41)


20th c. BCE and Earlier?

Origins of Writing!

Mesopotamia

4000-3200 Uruk Period• Inanna temple, Jordan

(1929), Schmandt-Bessert(UT)

• Bullae contracts (no time, parties, interest) commitment

3200-2370 Jemdet Nasr/Early Dynastic Period

• Pictographic tablets document econ

• Ante/post-deluvian• Ur founded (2600)

2111 - 2000 Uruk III• Final flowering of

Sumerians; then, • Elam I destroys Ur• Amorites conquer,

Babylon rises.

2370 - 2112 Sargon Period• Unifies Sumeria @ Akkad• Sir Woolsey discovers Ur “wall st.”

financial empire (1922-34)

1999- Amorites Babylon Rule

•1792-1749 Hammurabi

Sumerian Trailblazing

Science - Business

Religion Nammu (mother goddess), Ishtar or Inanna (love goddess), w/wind and thunder gods

Ziggurats

Goetzmann’s Anecdote(s)Ur, 1796

• Dumuzi-gamil: royal baker to Rim-Sin (5000 l/mo); (1000 yrs); Borrows Ag for 5-year term, makes “payday loans” to fishermen 20% per month! 15 such loans

• Shumi-abum: 500g Ag @ 3 3/4% p.a.; sells note to other investors.

• 2 other investors: Collect the debt in 1791.

Dumuzi-gamil fails in crash of ‘88

Martin Schøyen and the Schøyen Collection

1955: 16th c. French sermons as binding

1986: 15th c. Geraardsbergen Latin Bible

2004: 13,497+ MSS & artifacts. “Thrill of the chase”

Only Manuscripts in the Schøyen Collection (MSC) vol. i, ii and iii (Hermes)

Highlights - Earliest Known, etc.

• 40 fragments of Qumran DSS• 2nd - 7th c. BC Buddhist texts on palm, birch

and vellum• 21st c. pre-Hammurabi legal code (300 yrs)• 26th c. Gilgamesh Epic, Sumerian version• 5th c. Babylonian ziggurat brick w/

Nebuchadezzar's name inscribed• Math (cubic tables, geometry)

Beer Production, Pictographic script Uruk III, Sumer,

31st c. BC

Conclusions

What is it? Forward/futures contract

- contract- quantity

- performance period

What about Price?

Acknowledgements

The SchøyenCollection MS 1717, used by kind permission of

Martin Schøyen

Hope Derosette Dobelman

References

Goetzmann, William, Financing Civilization, book in preparation 2004. Available: http://viking.som.yale.edu/will/finciv/chapter1.htm

Senft, Dexter, “A Brief History of Computational Finance,” Presentation at the The Rice Center for Computational Finance and Economic Systems (CoFES) 2002 Symposium, Rice University, Houston, Texas 11/8/2002.

Shanks, Hershel, "Scrolls, Scripts & Stelae", Bib. Arch. Rev., Sep/Oct 2002

A New Anecdote of Antiquity in the History of Computational Finance John A. Dobelman Department of...

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