Murphy A. (2009) The smartest boys in the alley, early derivatives on the London stock market

October 24, 2009

Murphy, Anne L. (2009) Trading options before Black-Scholes: a study of the market in late seventeenth-century London. Economic History Review, 62/1: 8-30.

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The ledger of the financial broker Charles Blunt contains the details of some 1,500 transactions realized between 1692 and 1695, about a third of which regard the then novel trade in equity options (p.9). The technique had arisen in the 1620s in the commodity market and was proving very useful in the decade following the Glorious Revolution, when some 100 joint-stock companies were floated in London  (p.10). During the boom of the early 1690s, it is likely that “several thousand derivatives were transacted each year”.

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Murphy A. (2006) The Financial Revolution: a supply-side story (for real)

October 9, 2009

Murphy, Anne L. (2006) “Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt”, History, 91/302, 200-17.

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The sums involved in the so-called English Financial Revolution following the arrival on the throne of William III were altogether not that important: £6.9m from 1688 to 1702 while the government budget over the period reached £72m. However, “the impact of those novel methods of fund-raising was considerable”. In particular because small wealth-owners represented a large share of these early investors (p.201). Samuel Jeake, a merchant from Rye (East Sussex) was one of those small investors. He recorded his thought and his transactions in a diary and a few letters (p.202). Read the rest of this entry »

Gelderblom O. & Jonker J. (2008) What really brought interests down

September 21, 2009

Gelderblom, Oscar & Joost Jonker (2009) “The Conditional Miracle. Institutional change, fiscal policy, bond markets and interest rates in Holland 1514-1713”, Utrecht University Working Papers.

Jan de Baen, Portret van Johan de WittOscar en JoostKaartLeiden

This paper is available online (pdf).

Traditional explanation of the low issuing rate on public debt in the Dutch Republic emphasize the dramatic fall that occurred around 1600, but fail to explain why this level kept on falling from 1640 to 1725, until it had reached 2.5% (p.2). Read the rest of this entry »

Flandreau M. et al. (2009) The question was not how to develop finance

August 30, 2009

Flandreau, Marc, Christophe Galimard, Clemens Jobst and Pilar Nogués-Marco (2009) “The bell-jar: commercial interest rates betwee two revolutions” in The Origin and Development of Financial Markets and Institutions. From the Seventeenth Century to the Present, eds. Jeremy Atack and Larry Neal, Cambridge: Cambridge University Press, 161-208.

Picture 4Picture 3Picture 2

An earlier version of this paper is available here.

For institutionalist economists as well as for contemporary commentators, the wealth of nations in 18th century Europe was rooted in their political system which influenced the level of interest rates and thus trade (p.165). The confidence investors had in the government’s credit was thus seen as critical (tellingly John Law’s primary aim was to bring interest rates down; p.166). Read the rest of this entry »

Hoffman P., Postel-Vinay G. and Rosenthal J.-L. (1992) Private credit market in Paris

March 28, 2009

Hoffman, Philip T., Postel-Vinay, Gilles, and Rosenthal, Jean-Laurent (1992) “Private Credit Markets in Paris, 1690-1840”, The Journal of Economic History, 52/2, 293-306.



In Ancien Régime France, “credit assumed such importance that, as one historian suggest, an 18th-century person’s very reputation was bound up with his ability to obtain loans.” Until the late 19th century, the usual intermediaries on the credit market were not banks but notaries (p.294). Notarial offices recorded families’ transactions for generations, notaries thus enjoyed a unique ability to access information on the parties’ financial history. Their intimate knowledge of a person’s position allowed them to match borrowers and lenders, often on short notice. Read the rest of this entry »