Merton developed an approach to option pricing that led to the same equation that Black and Scholes had derived but which rested on different foundations. Merton's derivation did not invoke the Capital Asset Pricing Model, although it too involved assumptions about markets that were markedly at odds with the actual conditions of the early 1970s. Other contributions to option theory quickly followed, and their level of mathematical sophistication rapidly grew. Merton had introduced the use of rigorous stochastic calculus, and by the end of the 1970s the problem of derivatives pricing was reformulated in terms of martingale theory, an advanced area of "pure mathematics." The mathematical repertoire of Wall Street's quantitative finance specialists (first called "rocket scientists," then "quants") was being assembled.

Donald MacKenzie, An Engine, Not a Camera, loc. 143