Myron Scholes (b. 1941)

Who They Were

Myron Scholes (born 1941) is a Canadian-American economist known for his central role in the theory of financial derivatives. Working from the early 1970s onward, he helped develop a mathematical method for valuing options - contracts that give the right to buy or sell an asset at a set price. The pricing framework associated with his name became one of the most widely used tools in modern finance. In 1997 he shared the Sveriges Riksbank Prize in Economic Sciences with Robert Merton for a new method to determine the value of derivatives. He was also associated with the hedge fund Long-Term Capital Management, whose dramatic collapse came shortly after the prize - a sequence often cited by critics, though the underlying pricing model itself remains standard.

Key Contributions

Scholes co-developed the options-pricing framework that gave markets a systematic way to value derivatives. The key idea was that the value of an option could be derived from the price of the underlying asset and a few other measurable factors, using arguments about how a position could be hedged. This turned derivative pricing from guesswork into a precise, replicable calculation, and helped fuel the growth of modern derivatives markets. His 1997 Nobel, shared with Robert Merton, recognised this new method to determine the value of derivatives. The timing drew attention because it came shortly before the collapse of Long-Term Capital Management, a fund with which both laureates were associated - an episode critics often invoke, even as the pricing model itself remains a standard tool in finance.

On EconRecall

Canadian-American economist and co-author of the Black-Scholes options formula, who shared the 1997 Nobel. Play the games that feature Myron Scholes:

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