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HOW CLOSE ARE THE OPTION PRICING FORMULAS OF BACHELIER AND BLACK–MERTON–SCHOLES?
We compare the option pricing formulas of Louis Bachelier and Black–Merton–Scholes and observe—theoretically as well as for Bachelier's original data—that the prices coincide very well. We illustrate Louis Bachelier's efforts to obtain applicable formulas for option pricing in pre‐computer time. Furthermore we explain—by simple methods from chaos expansion—why Bachelier's model …