PULLMAN, Wash. — The co-creator of the mathematical formula that is credited with turning modern finance into a science, economist and Nobel Laureate Myron S. Scholes, will present the second annual Gary P. Brinson Distinguished Speaker lecture on Friday, April 25, at Washington State University. His speech, “Liquidity, Chaos, and the Role of Hedge Funds,” will begin at 10:30 a.m. in Todd Hall, Room 276, on the Pullman campus. WSU President V. Lane Rawlins, himself a former WSU economics professor, is expected to introduce Scholes at the presentation.
“We are tremendously honored to welcome such an eminent scholar as Myron Scholes to speak to our students and faculty,” said program host Rick Sias, finance professor who holds the Brinson Chair in Investment Management. “His impact on the worlds of finance and business are legendary, and we will benefit greatly from his shared insights.”
An academician, businessperson, and author, Scholes co-developed in 1973 the Black-Scholes Formula for the valuation of stock options, an important mechanism for managing risk in financial markets. Scholes was then an assistant professor of finance at MIT, and his co-inventor was Fischer Black, an independent finance contractor with a Ph.D. from Harvard in applied mathematics. Their work was extended by a colleague, Robert C. Merton of Harvard University. In 1997, Scholes and Merton received a Nobel Prize in Economic Sciences for the formula. Black had died before the Nobel Prize was awarded.
Economist Zvi Bodie likens the impact of the discovery of the Black-Scholes Formula on financial engineering to that of the discovery of the structure of DNA on genetic engineering. The formula contributed to the rapid growth of markets for derivatives, and its scientific importance extends to both the pricing of derivative equity securities and to valuation in other areas, such as currency options, interest rate options, and options on futures. And, because other types of economic contracts can be viewed as options, the formula has been applied as well to investment in buildings and machinery.
Scholes is a managing partner of Oak Hill Capital Management, and is involved in the private and public investment groups of the Robert M. Bass organization. He is the Frank E. Buck Professor of Finance Emeritus at the Stanford University Graduate School of Business, and serves on the boards of Intelligent Markets, American Century, Chicago Mercantile Exchange, FEP/Constellation, Unext.com and Salomon Swapco, Inc. He was a principal and limited partner at Long-Term Capital Management, L.P., and a managing director at Salomon Brothers, where he was instrumental in building Salomon Swapco.
Scholes held the Edward Eagle Brown Professor of Finance at the University of Chicago, and was a senior research fellow at the Hoover Institution, and director of the Center for Research in Security Prices and Professor of Finance at MIT’s Sloan School of Management. He earned his MBA and Ph.D. at the University of Chicago. He has been in the professorial ranks at MIT, the University of Chicago, and Stanford.
This lecture series is sponsored by a gift from Gary P. Brinson, CFA, a WSU MBA alumnus. He is the founder and retired chairman of Brinson Partners Inc, and is a nationally recognized authority on global investing. In 1999, he received the Award for Professional Excellence from the Association for Investment Management Research. After his retirement in 2000, the Brinson family created The Brinson Foundation, a philanthropic organization. The first Brinson Lecture was presented in April 2002 by Robert J. Shiller, renowned Yale economist and author of the New York Times nonfiction bestseller, “Irrational Exuberance.”
