|Born|| February 3, 1944|
|Died||March 3, 2017 73)(aged|
|Contributions|| Arbitrage pricing theory |
Binomial options pricing model
|Awards|| Smith Breeden Prize (2006)|
Deutsche Bank Prize (2015)
Stephen Alan "Steve" Ross (February 3, 1944 – March 3, 2017)was the inaugural Franco Modigliani Professor of Financial Economics at the MIT Sloan School of Management after a long career as the Sterling Professor of Economics and Finance at Yale . He is known for initiating several important theories and models in financial economics. He is a widely published author in finance and economics, and is coauthor of one of the best-selling Corporate Finance texts.
Franco Modigliani was an Italian-American economist and the recipient of the 1985 Nobel Memorial Prize in Economics. He was a professor at UIUC, Carnegie Mellon University, and MIT.
Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade". Its concern is thus the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. It has two main areas of focus: asset pricing and corporate finance; the first being the perspective of providers of capital, i.e. investors, and the second of users of capital.
The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, in Cambridge, Massachusetts, United States. MIT Sloan offers bachelor's, master's, and doctoral degree programs, as well as executive education. Its MBA program is among the most selective in the world, and it is ranked #1 in more disciplines than any other business school. MIT Sloan emphasizes innovation in practice and research. Many influential ideas in management and finance originated at the school, including the Black–Scholes model, the Solow–Swan model, the random walk hypothesis, the binomial options pricing model, and the field of system dynamics. The faculty has included numerous Nobel laureates in economics and John Bates Clark Medal winners.
He received his B.S. with honors from Caltech in 1965 where he majored in physics, and his Ph.D. in economics from Harvard in 1970, and has taught at the University of Pennsylvania, Yale School of Management, and MIT.
The University of Pennsylvania is a private Ivy League research university located in the University City neighborhood of Philadelphia, Pennsylvania. Chartered in 1755, Penn is the sixth-oldest institution of higher education in the United States. It is one of the nine colonial colleges founded prior to the Declaration of Independence. Benjamin Franklin, Penn's founder and first president, advocated an educational program that trained leaders in commerce, government, and public service, similar to a modern liberal arts curriculum. The university's coat of arms features a dolphin on its red chief, adopted from Benjamin Franklin's own coat of arms.
The Yale School of Management is the graduate business school of Yale University in New Haven, Connecticut. The School awards the Master of Business Administration (MBA), MBA for Executives (EMBA), Master of Advanced Management (MAM), and Ph.D. degrees, as well as joint degrees with nine other graduate programs at Yale University. As of August 2015, 668 students were enrolled in its MBA program, 114 in the EMBA program, 63 in the MAM program, and 51 in the PhD program; 122 students were pursuing joint degrees. In the 2017–18 school year, the school launched a one-year Master of Management Studies degree in Systemic Risk. The School has 86 full-time faculty members, and the dean is Edward A. Snyder.
Ross is best known for the development of the arbitrage pricing theory (mid-1970s) as well as for his role in developing the binomial options pricing model (1979; also known as the Cox–Ross–Rubinstein model). He was an initiator of the fundamental financial concept of risk-neutral pricing. In 1985 he contributed to the creation of the Cox–Ingersoll–Ross model for interest rate dynamics. Such theories have become an important part of the paradigm known as neoclassical finance.
In finance, arbitrage pricing theory (APT) is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various factors or theoretical market indices, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient. The model-derived rate of return will then be used to price the asset correctly—the asset price should equal the expected end of period price discounted at the rate implied by the model. If the price diverges, arbitrage should bring it back into line.
In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. The binomial model was first proposed by Cox, Ross and Rubinstein in 1979. Essentially, the model uses a "discrete-time" model of the varying price over time of the underlying financial instrument. In general, Georgiadis showed that binomial options pricing models do not have closed-form solutions.
In mathematical finance, the Cox–Ingersoll–Ross model describes the evolution of interest rates. It is a type of "one factor model" as it describes interest rate movements as driven by only one source of market risk. The model can be used in the valuation of interest rate derivatives. It was introduced in 1985 by John C. Cox, Jonathan E. Ingersoll and Stephen A. Ross as an extension of the Vasicek model.
Ross also introduced a rigorous modeling of the agency problem in 1973, as seen from the principal's standpoint.
Ross served as President of the American Finance Association in 1988. He was named International Association of Financial Engineers' Financial Engineer of the Year in 1996.
The American Finance Association (AFA) is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939. Its main publication, the Journal of Finance, was first published in 1946.
He gave the inaugural lecture of the Princeton Lectures in Finance, sponsored by the Bendheim Center for Finance of Princeton University, in 2001. It became a book in 2004,presenting neoclassical finance and defending it, including such notions as the efficiency and rationality of markets, against its critics, especially those who belong to the behavioral finance tradition.
Princeton University is a private Ivy League research university in Princeton, New Jersey. Founded in 1746 in Elizabeth as the College of New Jersey, Princeton is the fourth-oldest institution of higher education in the United States and one of the nine colonial colleges chartered before the American Revolution. The institution moved to Newark in 1747, then to the current site nine years later, and renamed itself Princeton University in 1896.
Neoclassical finance is a school of thought that has developed since the mid-1960s, building on earlier developments such as the Austrian School of economics but cross-fertilizing with atomic physics and other heavily quantitative disciplines.
There are several concepts of efficiency for a financial market. The most widely discussed is informational or price efficiency, which is a measure of how quickly and completely the price of a single asset reflects available information about the asset's value. Other concepts include functional/operational efficiency, which is inversely related to the costs that investors bear for making transactions, and allocative efficiency, which is a measure of how far a market channels funds from ultimate lenders to ultimate borrowers in such a way that the funds are used in the most productive manner.
Ross is a recipient of a 2006 Smith Breeden Prize, as well as a 2015 Deutsche Bank Prize for developing models used for assessing prices for options and other assets in the last 30 years.
Robert Cox Merton is an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management, known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes formula. In 1993 Merton co-founded hedge fund Long-Term Capital Management. In 1997 he received the Nobel Prize for his contributions in Economics.
Fischer Sheffey Black was an American economist, best known as one of the authors of the famous Black–Scholes equation.
Myron Samuel Scholes 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. Scholes is currently the chairman of the Board of Economic Advisers of Stamos Capital Partners. 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 and the Cutwater Advisory Board. He was a principal and limited partner at Long-Term Capital Management, L.P. 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.
Econophysics is an interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics.
Stewart Clay Myers is the Robert C. Merton (1970) Professor of Financial Economics at the MIT Sloan School of Management. He is notable for his work on capital structure and innovations in capital budgeting and valuation, and has had a "remarkable influence" on both the theory and practice of corporate finance. Myers, in fact, coined the term "real option". He is the co-author with Richard A. Brealey and Franklin Allen of Principles of Corporate Finance, a widely used and cited business school textbook, now in its 11th edition. He is also the author of dozens of research articles.
John Carrington Cox is the Nomura Professor of Finance at the MIT Sloan School of Management. He is one of the world's leading experts on options theory and one of the inventors of the Cox–Ross–Rubinstein model for option pricing, as well as of the Cox–Ingersoll–Ross model for interest rate dynamics. He was named Financial Engineer of the Year by the International Association of Financial Engineers in 1998.
Jean Tirole is a French professor of economics. He focuses on industrial organization, game theory, banking and finance, and economics and psychology. In 2014 he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of market power and regulation.
Robert Alan Jarrow is the Ronald P. and Susan E. Lynch Professor of Investment Management at the Johnson Graduate School of Management, Cornell University. Professor Jarrow is a co-creator of the Heath–Jarrow–Morton framework for pricing interest rate derivatives, a co-creator of the reduced form Jarrow–Turnbull credit risk models employed for pricing credit derivatives, and the creator of the forward price martingale measure. These tools and models are now the standards utilized for pricing and hedging in major investment and commercial banks.
Bendheim Center for Finance (BCF) is an interdisciplinary center at Princeton University. It was established in 1997 at the initiative of Ben Bernanke and is dedicated to research and education in the area of money and finance, in lieu of there not being a full professional business school at Princeton.
Bengt Robert Holmström is a Finnish economist who is currently Paul A. Samuelson Professor of Economics at the Massachusetts Institute of Technology. Together with Oliver Hart, he received the Central Bank of Sweden Nobel Memorial Prize in Economic Sciences in 2016.
A masters degree in quantitative finance concerns the application of mathematical methods to the solution of problems in financial economics. There are several like-titled degrees which may further focus on financial engineering, financial risk management, computational finance and/or mathematical finance.
Jonathan Edwards "Jon" Ingersoll, Jr. is an American economist. He is the Adrian C. Israel Professor of International Trade and Finance at Yale School of Management. Prior to coming to Yale he was on the faculty at the Graduate School of Business at the University of Chicago.
Robert James Shiller is an American economist, academic, and best-selling author. As of 2018, he serves as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for Finance. Shiller has been a research associate of the National Bureau of Economic Research (NBER) since 1980, was vice president of the American Economic Association in 2005, and president of the Eastern Economic Association for 2006–2007. He is also the co‑founder and chief economist of the investment management firm MacroMarkets LLC.
Michael Dean Woodford is an American macroeconomist and monetary theorist who currently teaches at Columbia University.
The Deutsche Bank Prize in Financial Economics honors renowned researchers who have made influential contributions to the fields of finance and money and macroeconomics, and whose work has led to practical and policy-relevant results. It is awarded biannually, since 2005, by the Center for Financial Studies (CFS), in partnership with Goethe University Frankfurt, and is sponsored by Deutsche Bank Donation Fund. The award carries an endowment of €50,000, which is donated by the Stiftungsfonds Deutsche Bank im Stifterverband für die Deutsche Wissenschaft.
Andrew Wen-Chuan Lo is the Charles E. and Susan T. Harris Professor of Finance at the MIT Sloan School of Management. Lo is the author of many academic articles in finance and financial economics. As of 2018, he is the chairman emeritus and senior advisor of the AlphaSimplex Group.
Markus Konrad Brunnermeier is an economist, who is the Edwards S. Sanford Professor of Economics at Princeton University. He is a faculty member of Princeton's Department of Economics and director of the Bendheim Center for Finance. His research focuses on international financial markets and the macro economy with special emphasis on bubbles, liquidity, financial crises and monetary policy. He promoted the concepts of liquidity spirals, CoVaR as co-risk measure, the paradox of prudence, and the I Theory of Money. He is or was a member of several advisory groups, including to the IMF, the Federal Reserve Bank of New York, the European Systemic Risk Board, the German Bundesbank and the U.S. Congressional Budget Office.
Thomas Philippon is a French economist. Philippon is professor of finance at the Leonard N. Stern School of Business, New York University. In addition to his professorship at NYU, Philippon has held visiting positions at Columbia University, Chicago University, Yale University, and Princeton University. He joined the Monetary Policy Advisory Panel at the Federal Reserve Bank of New York in 2015. He also serves as the Scientific Committee Director at the French Prudential Supervisory Authority, as an associate editor of the American Economic Journal, and as a research associate at the National Bureau of Economic Research.
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