If the amount of the typical change—the “volatility”—were known, they believed, the odds that a stock, bond, or any other asset would rise or fall by some proportion over time could be derived as well. The differential equations used to solve the Black-Scholes formula were adapted from physics equations that describe, among other phenomena in the physical world, the way cream spreads through a cup of coffee.4 Any one molecule’s trip is random, but as a group, the molecules distribute themselves in predictable fashion, from the center out. The cream will never go all to one side.
