Myron Scholes

Myron Scholes received his PhD in economics from the University of Chicago and worked at MIT and Chicago before joining Stanford. In 1973 he published, together with Fischer Black, "The Pricing of Options and Corporate Liabilities" in the Journal of Political Economy — a paper that introduced what became known as the Black-Scholes options pricing model. The model provided the first rigorous analytical formula for pricing European options on non-dividend-paying stocks, based on the insight that a continuously rebalanced hedge portfolio of stock and option must, in the absence of arbitrage, earn the risk-free rate. The Black-Scholes equation immediately transformed financial markets: it provided practitioners with a tractable pricing and hedging framework, enabling the explosive growth of listed and over-the-counter options markets from the 1970s onwards. The Chicago Board Options Exchange opened in 1973, the same year the paper was published, and the model was instantly adopted by traders. Scholes shared the 1997 Nobel Prize in Economics with Robert Merton (Fischer Black had passed away in 1995). Scholes and Merton were also partners at Long-Term Capital Management, whose 1998 collapse provided a cautionary lesson about the limits of quantitative models under extreme market stress. He later co-founded Platinum Grove Asset Management. He is a fellow of the American Finance Association and American Academy of Arts and Sciences.