From Steve Dalton
I struggled to see anything novel in Lisa Grossman’s story on how Brownian motion can describe stock market movements (8 March, p 11). In 1973, Fischer Black and Myron Scholes published what is now known as the Black-Scholes-Merton model, whose central assumption is that stock prices are driven by a Brownian motion stochastic process. Since then, enormous amounts of time have been spent by financial quantitative analysts comparing actual market behaviour with that model. Refined models have been proposed that allow the modelling of jumps to reflect markets reacting strongly to good or bad news, which can be impossible to model sensibly with Brownian motion alone.
Chipstead, Kent, UK
