Nobel Laureate Myron S. Scholes

Blazing a Path in Risk Management

Myron S. Scholes developed a method of determining the value of derivatives, the Black-Scholes formula, with Fischer Black, who died two years before Scholes was recognized with the Nobel Prize. This methodology paved the way for economic valuations in many areas. It also generated new financial instruments and facilitated more-effective risk management in society.

Scholes is widely known for his seminal work in options pricing, capital markets, tax policy, and the financial services industry. He is the Frank E. Buck Professor of Finance Emeritus at the Stanford University Graduate School of Business.

Scholes is also the chief investment strategist at Janus Henderson Investors, and is chairman of the board of economic advisors of Stamos Capital Management. He previously served as chairman of Platinum Grove Asset Management, which he cofounded in 1999, as well as on the Dimensional Fund Advisors board of directors.

Scholes was born in 1941 in Timmins, Ontario. He became interested in economics through his parents and relatives. As a young man, he developed an eyesight impairment. In his Nobel Prize autobiography, Scholes recalled that as a result of his limited ability to read for extended periods of time, “I learned to think abstractly and to conceptualize the solution to problems. Out of necessity, I became a good listener—a quality appreciated by subsequent associates and students.” Luckily, an operation when he was 26 years old improved his eyesight.

While at McMaster University, where he majored in economics, Scholes became acquainted with the work of George Stigler and Milton Friedman. Scholes enrolled at the University of Chicago and studied with Eugene F. Fama and Merton Miller, while earning his MBA at Booth in 1964 and his PhD in 1970.

In 1968, as he was wrapping up work on his PhD, Scholes accepted a job as an assistant professor of finance at MIT’s Sloan School of Management. At Sloan, he met Fischer Black, at the time a consultant working for management consultant firm Arthur D. Little, and the two embarked on a productive research partnership.

After a visiting stint at the University of Chicago during 1973-74, Scholes returned to his graduate institution as the Edward Eagle Brown Professor of Finance at Booth from 1974 until 1983. During that time, he also became involved with the Center for Research in Security Prices (CRSP), where he served as director.

In 1983, Scholes moved to the Stanford Graduate School of Business.