Modern finance began in the 1950s. The breakthroughs of Markowitz, Treynor, Sharpe, Lintner, and Mossin led to the Capital Asset Pricing Model in the 1960s, which became the quantitative model for measuring risk.
Another important influence of research on investment practice in the 1960s was the Samuelson-Fama efficient markets hypothesis, which roughly says that security prices reflect information fully and immediately.
The most important development in terms of practical impact, however, was the Black-Scholes model for option pricing in the 1970s. This theoretical framework was instantly adopted by practitioners.
Option pricing theory is one of the pillars of finance and has wide-ranging applications.
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