Biography
Myron Samuel Scholes was born on July 1, 1941, in Timmins, Ontario, Canada. He attended Westdale Secondary School and continued his education at McMaster University, later earning his PhD from the University of Chicago. Scholes became a major figure in financial economics in the 20th century through his pioneering work in options pricing theory.
Scholes is most renowned for co-developing the Black-Scholes options pricing model with Fischer Black. This mathematical model transformed modern finance by providing a systematic way to value options contracts, eliminating risk with dynamic hedging strategies. Their work changed the operation of financial markets and fueled the rapid growth of derivatives trading in today's global finance.
In 1997, Scholes received the Nobel Memorial Prize in Economic Sciences, sharing the award with Robert C. Merton for their "new method to determine the value of derivatives." The Royal Swedish Academy of Sciences acknowledged that their work allowed options to be valued scientifically, laying the groundwork for managing economic risk worldwide. Fischer Black, having passed away in 1995, was not eligible to share in the Nobel recognition.
Throughout his academic career, Scholes held esteemed positions at top institutions. He was the Edward Eagle Brown Professor of Finance at the University of Chicago, a finance professor at MIT's Sloan School of Management, and later the Frank E. Buck Professor of Finance, Emeritus, at Stanford Graduate School of Business. He also served as a senior research fellow at the Hoover Institution and directed the Center for Research in Security Prices.
Outside of academia, Scholes gained practical financial industry experience. He was a managing director at Salomon Brothers and notably a principal and limited partner at Long-Term Capital Management (LTCM), a highly leveraged hedge fund that faced a dramatic collapse in 1998. After that, he continued in finance as chairman of Platinum Grove Asset Management, served on the boards of American Century Mutual Fund and Dimensional Fund Advisors, and now works as Chief Investment Strategist at Janus Henderson.
Before Fame
Growing up in Timmins, a mining town in northern Ontario, Scholes had a simple Canadian upbringing before diving into his academic interests. After finishing his studies at Westdale Secondary School and McMaster University, he moved to the United States to study at the University of Chicago, known for its strong economics department and focus on free-market ideas.
The 1960s and 1970s were a time of fast-paced innovation in financial theory, as scholars started using advanced mathematical methods to analyze market practices that had previously been based on intuition. Scholes found himself in this environment at the University of Chicago, where he encountered the ideas that would shape his career. Concepts like the efficient market hypothesis and modern portfolio theory were gaining traction, forming the theoretical groundwork for Scholes and his colleagues to develop their options pricing model.
Key Achievements
- Co-developed the Black-Scholes options pricing model, revolutionizing modern finance
- Won the 1997 Nobel Memorial Prize in Economic Sciences
- Served as professor at leading institutions including University of Chicago, MIT, and Stanford
- Became Fellow of the American Academy of Arts and Sciences
- Directed the Center for Research in Security Prices at the University of Chicago
Did You Know?
- 01.Scholes was a principal at Long-Term Capital Management when it collapsed in 1998, requiring a $3.6 billion bailout coordinated by the Federal Reserve
- 02.The Black-Scholes model is used to price trillions of dollars worth of derivatives contracts daily in global financial markets
- 03.He received an honorary doctorate from Paris Dauphine University in 1989, eight years before winning the Nobel Prize
- 04.Scholes became a Fellow of the Econometric Society in 1984, recognizing his contributions to mathematical economics
- 05.Despite winning the Nobel Prize for work on derivatives, he experienced firsthand the risks of highly leveraged trading through the LTCM collapse
Awards & Honors
| Award | Year | Details |
|---|---|---|
| Nobel Prize in Economic Sciences | 1997 | for a new method to determine the value of derivatives |
| Fellow of the Econometric Society | 1984 | — |
| honorary doctor of Paris Dauphine University | 1989 | — |
| Fellow of the American Academy of Arts and Sciences | — | — |