The size and utility of derivative markets are vastly unknown to the public, despite being developed from a single equation derived from physics.

• This equation is the foundation for four multi-trillion dollar industries and has transformed risk approaches.
• Physics concepts like heat transfer and atom discovery influenced financial strategies used by mathematicians and scientists.
• Jim Simons set up the Medallion Investment Fund in 1988, which outperformed market averages for 30 years.
• Despite Jim Simons' success, being proficient in mathematics does not guarantee financial market success, as demonstrated by Isaac Newton's losses.

Louis Bachelier and others pioneered the use of mathematics to model financial markets and the pricing of complex contracts like options.

• Louis Bachelier, whose parents died when he was 18, moved to Paris to study physics and worked at the Paris Stock Exchange, sparking his interest in options.
• Thales of Miletus executed the first known call option by securing the right to rent olive presses in anticipation of a bumper crop of olives.
• Options offer the right to buy (call option) or sell (put option) an asset at a later date for a specified price, which can limit downside risk, provide leverage, or serve as a hedge.

The Black-Scholes-Merton equation, derived from mathematical models, revolutionized financial markets by accurately pricing options and derivatives.

• The equation provided a fair pricing mechanism for both option buyers and sellers, balancing the expected returns for both parties.
• The Chicago Board Options Exchange, founded in the same year the equation was published, led to rapid and widespread adoption in the finance industry.
• The equation enabled the creation of new markets, the growth of derivative markets, and provided tools for hedging and leveraging investments.