Myron Samuel Scholes. Economist known as one of the authors of the Black-Scholes equation. In 1997 he was awarded the Nobel Prize for Economic Sciences for a new method of determining the value of derivatives. The model provides the fundamental conceptual framework for the valuation of financial options, and is known as the Black-Scholes model, which has become the standard in financial markets worldwide. Trillions of dollars in financial option operations are executed each year with this model and the derivations thereof. All binomial option models have evolved from the original concept.
Summary
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- 1 Biographical data
- 1 Childhood and youth
- 2 Other important stages of your life
- 2 Important achievements, contributions or contributions
- 1 Black-Scholes equation
- 2 Awards and publications
- 3 Sources
Biographical data
Childhood and youth
Member of a family of well – off middle class, because his father was a dentist and his mother and uncle managed a small chain of shops around the city; his family moved to Hamilton and there his life changed radically.
His mother died of cancer when the young Myron was only 16 years old and, soon after, he developed an eye disease that prevented him from reading for long periods of time, so he learned to think abstractly and conceptualize the solution of problems, until that with 26 years of age they had a corneal transplant .
Upon his mother’s death, he decided to stay in Hamilton and enroll at McMaster University, where he began reading the works of Masters George Stigler and Milton Friedman and from which he graduated in 1962 . With the intention of developing his potential, he went to Chicago to study Finance and specialized in Computer Science , although he finally did his PhD in Economic Research.
Other important stages of his life
In 1968 he joined as an assistant professor of Finance at the Sloan School of Management at the Massachusetts Institute of Technology (MIT), from where he moved to Chicago to work at the Research Center of this University ( 1973 – 1980 ). In 1981 , he was appointed to the Stanford University School of Economics and in 1983 to the School of Law .
Achievements, contributions or important contributions
Since 1990 his interests have been oriented towards the application of financial technology in practice, which has given him a better understanding of the evolution of financial institutions and markets. His research in recent years has focused on the interaction and evolution of the markets and the aforementioned institutions.
Black-Scholes equation
The Black-Scholes equation (pronounced / ˌ blæk ʃoʊlz /) is a mathematical differential equation contained in the Black-Scholes model. The model is named after the two economists Fischer Black and Myron Scholes, even contributions from others. The model is used in the field of dynamic sureties and financial engineering for the valuation of derivative investment instruments in financial markets.
The Black-Scholes equation offers theoretical estimates of the price of financial instruments, such as European-style options. The process of estimating the price is called valuation. The model also shows that the option has a single price independent of the risk of the instrument.
In finance, valuation is a complicated process where value is estimated. Valuation is important in situations that include investment analysis, capital budgeting, and acquisitions where there is risk due to the uncertainty that exists. The Black-Scholes equation alleviates but does not totally eliminate uncertainty.
The model was first articulated by Fischer Black and Myron Scholes in their 1973 article, “The Price of Options and Corporate Responsibilities . ” A partial differential equation is derived, which is currently called the Black-Scholes equation, which regulates the option price over time. The key idea behind the derivation was to perfectly hedge the call and put option of the underlying asset in the right way and therefore “eliminate risk”. This hedge is known as delta hedging and is the foundation for more complex hedging strategies , such as those in Wall Street investment banks. The coverage implies that there is only a fair price for the option and is given by the Black-Scholes formula.
Awards and publications
In recognition of his work, Scholes has received several awards, most notably the 1997 Nobel Prize for his work on derived products.
He has published the results of so many years of research in specialized magazines such as “Accounting Review” , “Journal of Business” , “Journal of Finance” , “Journal of Political Economy” , “Journal of Financial Economics ” and “Review of Financial Studies” ; his most famous work is ” Taxes and Business Strategies “ ( Taxes and Business Strategies: A Planning Approach ), published in 1992 .
