CAPM arose from an operations-research method borrowed from physics-style infinitesimal analysis.

Evidence

What Modigliani and Miller’s paper taught Treynor to do, in other words, was to look outside the corporation to the capital markets in order to solve problems in decision making like the choice of discount rate to use in making investment decisions. Mathematically, Treynor based his analysis “on the kind of work that I had seen the senior guys doing in the operations research group” of Arthur D. Little: they would first “try to solve the problem for a single [time] period … drive that … solution to an infinitesimally small time period, turn it into a partial differential equation and then integrate that thing out over finite time” (Treynor interview). — Donald MacKenzie, An Engine, Not a Camera, 565

Categorization

• XREF: Connects to the methodological thread of financial models importing physics mathematics begun in chapter 2; parallels how Sharpe arrived at CAPM via a different route. — connects to: Patenting financial algorithms made finance seem scientifically grounded — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 957; Purely mathematical theories can gain unforeseen practical applications — G. H. Hardy, A Mathematician’s Apology, 265

Broader Connections

• Purely mathematical theories can gain unforeseen practical applications #expands (0.80) — G. H. Hardy, A Mathematician’s Apology, 265
• Patenting financial algorithms made finance seem scientifically grounded #qualifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 957