Myron Scholes

Myron Scholes co-developed the Black-Scholes option pricing formula with Fischer Black in 1973, receiving the 1997 Nobel Prize in Economics with Robert Merton. The formula transformed options trading from a niche activity into a standardized, liquid market by giving participants a reliable method for pricing any option. Scholes was also a partner at Long-Term Capital Management and has advised on quantitative finance strategies throughout his career. His academic work spans tax policy, financial innovation, and risk management beyond his foundational options pricing contribution. The LTCM episode — in which a fund using extreme leverage based partly on models descended from Black-Scholes suffered catastrophic losses during the 1998 emerging market crisis — provided a real-world lesson in the limits of option pricing models when liquidity disappears and correlations converge to one, a lesson that has shaped how risk managers at major institutions think about tail risk and model risk.