Myron Scholes

Myron Scholes
Born	Myron Samuel Scholes 1 7, 1941
Birthplace	Timmins, Ontario, Canada
Nationality	Canadian, American
Occupation	Financial economist, academic, investment strategist
Known for	Black–Scholes model, dynamic hedging, tax planning
Education	University of Chicago (MBA, PhD)
Awards	Nobel Memorial Prize in Economic Sciences (1997)

Myron Samuel Scholes (born July 1, 1941) is a Canadian-American financial economist who, together with the late Fischer Black, developed the Black–Scholes options pricing model — a mathematical formula that transformed modern finance by providing the first systematic, theoretically rigorous method for valuing stock options and other derivatives. In 1997, Scholes was awarded the Nobel Memorial Prize in Economic Sciences, shared with Robert C. Merton, for developing "a new method to determine the value of derivatives." The Royal Swedish Academy of Sciences noted that the work of Black, Scholes, and Merton laid the foundation for the rapid growth of financial markets worldwide and the management of economic risk on a global scale. Scholes holds the title of Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business, and has held academic positions at the MIT Sloan School of Management and the University of Chicago Booth School of Business. His career has spanned academia, investment banking, and hedge fund management, including a controversial period as a principal at Long-Term Capital Management (LTCM), which collapsed in 1998.

Early Life

Myron Samuel Scholes was born on July 1, 1941, in Timmins, a mining city in northern Ontario, Canada. He grew up in Ontario during a period of significant economic change in Canada, and his early exposure to the financial world shaped his later academic and professional interests.

Scholes's family had roots in business and entrepreneurship. His intellectual development was influenced by the economic environment of post-war Canada, and he developed an early interest in the mechanics of financial markets and decision-making under uncertainty. These formative experiences in Ontario would later inform his academic work on risk, pricing, and market behavior.

Education

Scholes received his undergraduate education at McMaster University in Hamilton, Ontario, where he earned a Bachelor of Arts degree. In September 2025, McMaster University honored Scholes, along with fellow Nobel laureate Donna Strickland, at a street naming event on the university's campus, recognizing their contributions as distinguished alumni.

After completing his undergraduate studies, Scholes moved to the United States to pursue graduate work at the University of Chicago, one of the foremost centers for the study of economics and finance. At Chicago, Scholes earned both a Master of Business Administration (MBA) and a Doctor of Philosophy (PhD). His doctoral work was supervised by Eugene Fama and Merton Miller, both of whom would themselves become Nobel laureates. Scholes was also influenced by other prominent economists in the Chicago school, including George Stigler and Milton Friedman, whose emphasis on rigorous quantitative analysis and market efficiency shaped his intellectual approach to finance. The Chicago school of economics tradition, with its focus on rational expectations, efficient markets, and mathematical modeling, provided the intellectual framework within which Scholes would develop his most significant contributions to financial theory.

Career

Academic Career

Following the completion of his PhD at the University of Chicago, Scholes embarked on an academic career that would place him at some of the most prestigious institutions in the United States. He began his teaching career at the MIT Sloan School of Management, where he served as a professor of finance. It was during this period at MIT that Scholes began his collaboration with Fischer Black, who was then working as a financial consultant. The two scholars began working on the problem of options pricing, a challenge that had vexed economists and financial practitioners for decades.

Scholes subsequently moved to the University of Chicago, where he held the position of Edward Eagle Brown Professor of Finance. At Chicago, he was also director of the Center for Research in Security Prices (CRSP), a research center that maintains a comprehensive database of stock market data used by financial researchers worldwide.

Later in his career, Scholes joined the faculty of the Stanford Graduate School of Business, where he held the Frank E. Buck Chair in Finance. He also served as a senior research fellow at the Hoover Institution at Stanford University. Scholes was named Frank E. Buck Professor of Finance, Emeritus, at Stanford, a title he continues to hold. When Scholes received the Nobel Prize in 1997, he became the second Stanford GSB faculty member to win the award.

In January 2023, the MIT Sloan School of Management named Scholes the recipient of the S. Donald Sussman Award, further recognizing his contributions to the field of finance.

The Black–Scholes Model

The work for which Scholes is most recognized is the development, with Fischer Black, of the Black–Scholes model (also referred to as the Black–Scholes–Merton model), a mathematical formula for pricing European-style stock options. The model was first published in 1973 and represented a breakthrough in financial economics by providing a closed-form solution for the fair price of an option based on a set of observable variables: the price of the underlying asset, the exercise price, the time to expiration, the risk-free interest rate, and the volatility of the underlying asset.

The Royal Swedish Academy of Sciences, in its press release announcing the 1997 Nobel Prize, stated that Black, Scholes, and Merton "developed a pioneering formula for the valuation of stock options" and that "their methodology has paved the way for economic valuations in many areas. It has also generated new types of financial instruments and facilitated more efficient risk management in society." The Academy further noted that the ability to price options in a scientifically rigorous manner created a foundation for the rapid growth of markets for derivatives, which expanded dramatically in the decades following the publication of the Black–Scholes formula.

A central insight of the Black–Scholes approach was the concept of dynamic hedging — the idea that an investor could construct a risk-free portfolio by continuously adjusting a position in the underlying asset to offset the risk associated with holding an option. This concept of risk elimination through dynamic replication was fundamental to the derivation of the formula and had broad implications for financial theory and practice.

Robert C. Merton, who was a colleague of Scholes at MIT, independently developed a mathematical framework that extended and formalized the Black–Scholes approach using stochastic calculus, placing the model on a more rigorous mathematical footing. Fischer Black died in 1995, two years before the Nobel Prize was awarded; because the prize is not awarded posthumously, Scholes and Merton shared the 1997 award. The Nobel committee, however, explicitly acknowledged Black's foundational contributions to the work.

The Black–Scholes model became one of the most widely used tools in financial markets. The formula and its extensions are employed by options traders, risk managers, and financial engineers around the world. The development of the model coincided with the opening of the Chicago Board Options Exchange (CBOE) in 1973, and the formula's availability contributed to the rapid expansion of options trading in subsequent years.

Salomon Brothers

In addition to his academic work, Scholes pursued a career in the financial industry. He served as a managing director at Salomon Brothers, one of the most prominent investment banks on Wall Street during the 1980s and 1990s. At Salomon Brothers, Scholes was involved in applying quantitative methods to fixed-income trading and other areas of finance, bridging the gap between academic theory and market practice.

Long-Term Capital Management

One of the most scrutinized chapters of Scholes's career was his involvement with Long-Term Capital Management (LTCM), a hedge fund founded in 1994. Scholes was a principal and limited partner at LTCM, alongside Merton and a team of other prominent traders and academics.

LTCM initially produced substantial returns using highly leveraged trading strategies based on quantitative models of fixed-income markets. The fund's strategies relied on the convergence of spreads between related securities, and the firm employed significant amounts of leverage to amplify returns from what were often small pricing discrepancies.

In 1998, LTCM suffered catastrophic losses in the wake of the Russian financial crisis and a global flight to liquidity. The fund's highly leveraged positions, combined with market dislocations that exceeded what the firm's models had predicted, led to losses that threatened the stability of the broader financial system. In September 1998, the Federal Reserve Bank of New York coordinated a bailout of LTCM involving a consortium of major banks and financial institutions, which injected approximately $3.6 billion into the fund to prevent a disorderly unwinding of its positions.

The collapse of LTCM became one of the most studied episodes in financial history, raising fundamental questions about the limits of quantitative models, the dangers of excessive leverage, and the systemic risks posed by large, interconnected financial institutions. Scholes, having won the Nobel Prize just one year before the collapse, faced significant public scrutiny over the failure. The episode served as a cautionary tale about the gap between theoretical models and the complexities of real-world financial markets, particularly during periods of extreme stress when correlations among asset classes can break down and liquidity can evaporate.

Tax Shelter Controversy

Following the LTCM episode, Scholes became involved in another controversy related to tax shelters. In 2003, The New York Times reported on tax shelter transactions that Scholes had been associated with, which were the subject of scrutiny by the United States Department of Justice. The Department of Justice pursued legal action related to certain tax transactions involving Long-Term Capital Management and associated entities. Tax planning had been one of Scholes's areas of scholarly expertise, and his academic work had addressed the intersection of taxation and corporate financial decision-making.

Later Career and Investment Management

After LTCM, Scholes continued to be active in the financial industry. He served as chairman of Platinum Grove Asset Management, a hedge fund. He also held board and advisory positions at several investment management firms, including the Dimensional Fund Advisors board of directors, the American Century Mutual Fund board of directors, the Board of Economic Advisers of Stamos Capital Partners, and the Cutwater Advisory Board.

Scholes serves as the Chief Investment Strategist at Janus Henderson, a global asset management firm, a role in which he applies his expertise in financial economics to investment strategy and portfolio management.

Personal Life

Scholes holds dual Canadian and American citizenship, having been born in Canada and pursued the majority of his career in the United States. He has maintained connections to his Canadian roots; in September 2025, he participated in events at McMaster University, his undergraduate alma mater, including a street naming ceremony honoring him and fellow Nobel laureate Donna Strickland, as well as a public discussion about the significance of the Nobel Prize.

Recognition

Scholes's most significant honor is the 1997 Nobel Memorial Prize in Economic Sciences, which he shared with Robert C. Merton. The prize was awarded "for a new method to determine the value of derivatives." The Royal Swedish Academy of Sciences credited the work of Black, Scholes, and Merton with making it possible to scientifically determine the value of options, creating a basis for the rapid expansion of derivatives markets and more efficient risk management in society at large. Fischer Black, who had died in 1995, was acknowledged by the Nobel committee as a key contributor to the foundational work but could not share in the prize due to the Nobel rules against posthumous awards.

In 2023, the MIT Sloan School of Management named Scholes the recipient of the S. Donald Sussman Award, recognizing his contributions to the practice and study of finance. The University of Chicago Booth School of Business lists Scholes among its Nobel laureate faculty members.

Scholes's alma mater, McMaster University, honored him in 2025 by naming a road on the university campus after him, alongside fellow alumna and Nobel laureate Donna Strickland. McMaster also hosted a public MacTalks discussion event featuring Scholes and Strickland in conversation about the Nobel Prize and its significance.

Scholes has been recognized by various professional and academic bodies throughout his career. His academic work has been influential not only through the Black–Scholes model but also through contributions to the study of tax policy and corporate finance, the Center for Research in Security Prices, and the broader development of quantitative methods in finance.

Legacy

The Black–Scholes model remains one of the most consequential contributions to financial economics of the twentieth century. The formula and its extensions are embedded in the infrastructure of global financial markets, used daily by traders, risk managers, portfolio managers, and financial engineers to price and hedge options and other derivative securities. The development of the model contributed to the creation of entire new categories of financial instruments and markets, including the standardized exchange-traded options markets that emerged in the 1970s and the vast over-the-counter derivatives markets that followed.

The theoretical framework underpinning the Black–Scholes model — particularly the insight that options can be replicated and hedged through continuous trading in the underlying asset — influenced virtually all subsequent work in financial engineering and quantitative finance. The concept of risk-neutral pricing, which emerged from the Black–Scholes framework, became a standard tool in the valuation of complex financial products.

At the same time, the collapse of LTCM in 1998, just one year after Scholes received the Nobel Prize, became a defining episode in the history of financial risk management. The event exposed the limitations of quantitative models when applied in conditions of extreme market stress and high leverage, and it prompted extensive debate among academics, regulators, and market practitioners about the appropriate role of mathematical models in financial decision-making. PBS's NOVA program produced a documentary titled Trillion Dollar Bet that examined the development of the Black–Scholes formula and the subsequent LTCM collapse, bringing the story to a broad public audience.

Scholes's career thus embodies both the transformative potential and the inherent limitations of quantitative approaches to finance. His contributions to options pricing theory earned him the highest honors in economics, while his practical experience at LTCM provided one of the most studied lessons in the history of financial markets about the risks of applying theoretical models without adequate consideration of tail risks, liquidity constraints, and the behavior of markets under stress.

Through his academic positions at MIT, the University of Chicago, and Stanford, and through his advisory and investment management roles, Scholes has trained and influenced multiple generations of financial economists, traders, and risk managers. His intellectual influence, channeled through both the Chicago school tradition and the practical application of quantitative finance, continues to shape the field of financial economics.