Myron Samuel Scholes ( ; born July 1, 1941) is a Canadian–American financial economist. Scholes is the Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business, Nobel Laureate in Economic Sciences, and co-originator of the Black–Scholes options pricing model. This mathematical model, developed with Fischer Black, revolutionized finance by providing a systematic way to value options through the elimination of risk via dynamic hedging.

In 1997, Scholes was awarded the Nobel Memorial Prize in Economic Sciences (shared with Robert C. Merton) for a "new method to determine the value of derivatives." The Royal Swedish Academy of Sciences noted that their work made it possible to observe the value of options in a scientific manner, effectively creating a foundation for the rapid growth of financial markets and the management of economic risk across the globe.

Scholes is currently the Chief Investment Strategist at Janus Henderson. Previously he served as the chairman of Platinum Grove Asset Management and on the Dimensional Fund Advisors board of directors, American Century Mutual Fund board of directors, chairman of the Board of Economic Advisers of Stamos Capital Partners, and the Cutwater Advisory Board. He was a principal and limited partner at Long-Term Capital Management (LTCM), a highly leveraged hedge fund that collapsed in 1998, and a managing director at Salomon Brothers. Other positions Scholes held include the Edward Eagle brown Professor of Finance at the University of Chicago, senior research fellow at the Hoover Institution, director of the Center for Research in Security Prices, and professor of finance at MIT's Sloan School of Management. Scholes earned his PhD at the University of Chicago. He earned his MBA at the Booth School of Business in 1964 and his Ph.D. in 1969 with a dissertation written under the supervision of Eugene Fama and Merton Miller. For the following years Scholes, Black and Merton undertook groundbreaking research in asset pricing, including the work on their famous option pricing model.

The framework is built on three pillars:

  1. All Taxes: Planning must consider taxes at all levels (corporate, individual, and foreign).
  2. All Parties: Transactions must be beneficial after considering the tax implications for both sides (contracting theory).
  3. All Costs: Tax minimization is only optimal if the "non-tax costs" (like legal fees or financial reporting costs) do not outweigh the tax savings.

Investment activity

In 1990 Scholes became more involved directly with the financial markets. He went to Salomon Brothers as a special consultant, then becoming a managing director and co-head of its fixed-income-derivative group. The fund, which started operations with $1 billion of investor capital, performed extremely well in the first years, realizing annualized returns of over 40%.

References

  • Nobel e-Museum page on 1997 prize for economics
  • Platinum Grove Asset Management, company where Scholes is chairman
  • Speaker at Hedge Fund Conference
  • PBS Nova – Trillion Dollar Bet (2000)
  • IDEAS/RePEc
  • "Findings and Opinion" Long Term Capital Holdings vs. United States