Myron S. Scholes, Awarded Nobel Prize in 1997,

Lecture presented April 7, 1999.

Myron Scholes is the co-inventor (with Robert Merton and Fischer Black) of a formula that turned risk management from a guessing game into a science. The Black-Scholes formula for valuing options answered the question that many generations of mathematical economists had unsuccessfully struggled to solve. The Black-Scholes option pricing model led to an explosive growth in stock options and other financial derivatives. Uses for the formula have been found in virtually every area of finance.

The Nobel Committee recognized Professor Scholes jointly with Robert C. Merton “for a new method to determine the value of derivatives.”

Quotes from Myron Scholes’ April 1999 lecture at Trinity University:

I was born in Timmins, Ontario, Canada on July 1, 1941. …Timmins was a small town. There were about 25,000 people in Timmins, then and today. The temperature fell to 40 below zero at times in the winter…the summers were short. The town and region were famous for mining gold and silver. The town produced great hockey players. In more recent years, Timmins has become famous because of Shania Twain, the country and western singer born there. I think that I am the only Nobel Prize winner.

Although my family wanted me to apply to other schools, such as Harvard, I only wanted to go to the University of Chicago – Chicago, where Stigler and Friedman were teaching and conducting research. ... Intuitively, I knew that if I wanted to grow and achieve my potential, I should learn and work with those who were the best and who could bring out the best in me. And, that has become a cornerstone of my career. I have always tried to go where the best were located.

In 1973, soon after the Black-Scholes model was published, the Texas Instruments Co. (TI) marketed a calculator containing our formula. Traders on the options exchange such as the CBOE could use the calculator to calculate Black-Scholes model values given their inputs. I called TI and asked them whether they would give us royalties for using the model. They said no, the model was in the public domain. I asked if they would be willing to send me one of the calculators. They suggested that I buy one using my own nickel.

Additional resources on Myron S. Scholes are available at the Nobel web site.

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