Myron Scholes Quotes

Powerful Myron Scholes for Daily Growth

About Myron Scholes

Myron Scholes (born July 14, 1941) is an American economist and mathematician who has significantly contributed to the field of financial economics, particularly in options pricing theory. Born in Los Angeles, California, Scholes developed a strong interest in mathematics at an early age, earning his Ph.D. in statistics from Stanford University in 1967. In the late 1960s, while working as a consultant for IBM, Scholes met Fischer Black, who introduced him to options trading. Together with Robert Merton, they developed the Black-Scholes-Merton model, a theoretical framework for pricing European call options. This groundbreaking work, published in 1973, earned Scholes and Merton the Nobel Memorial Prize in Economic Sciences in 1997 (Black had passed away before the award was given). Scholes' career has been marked by his desire to apply mathematical theories to real-world financial problems. In addition to his work on options pricing, he has also made significant contributions to portfolio theory and risk management. His book, "Option Pricing: Financing with Derivatives" (1980), co-authored with Merton, is a seminal work in the field. In 1988, Scholes joined the University of Chicago as a professor of finance, where he continues to teach and conduct research. He has also been involved in various business ventures, including the development of financial derivatives and risk management systems for banks and other financial institutions. Throughout his career, Myron Scholes' work has had a profound impact on financial markets, shaping the way investors and traders approach options trading and risk management. His contributions continue to influence modern finance, making him one of the most influential economists of the 20th century.

Interpretations of Popular Quotes

"Capital asserts a life of its own, and it's not until it can feed itself that you can be sure of making a profit."

This quote by Myron Scholes emphasizes the idea that capital, or financial resources, must be self-sustaining in order to generate profits. It suggests that simply investing money does not guarantee success; instead, it implies the need for strategic planning and growth mechanisms within an investment or business enterprise so that the funds can continuously grow and sustain themselves over time. Essentially, the capital should have a "life of its own" – meaning it should have the ability to generate income and increase in value without constant input from external sources – to ensure long-term profitability.

"If you can't model risk, you can't manage it."

This quote by Myron Scholes emphasizes the importance of understanding and quantifying risk in financial decision-making. To effectively manage risk, one must have a clear grasp of its nature and magnitude. By modeling risk, investors and financiers can predict potential outcomes under different scenarios, make informed decisions, and structure strategies to minimize losses or maximize returns. Without a sound model for assessing risk, it becomes difficult to control and navigate the inherent volatility in financial markets.

"Options are like a variable annuity with the annuitant having the option to be murdered at any time."

This quote by Myron Scholes suggests that options, which are financial instruments allowing the holder to buy or sell an underlying asset at a predetermined price on or before a specific date, can carry significant risk. He compares this risk to the hypothetical situation of a variable annuity holder, who receives regular payments based on their investment, being subjected to unexpected harm. In essence, he is warning that the use of options involves potential losses due to market volatility or unforeseen events, just as the annuitant's life can be abruptly ended in his metaphor.

"In finance, nothing is for certain except the dynamics of change."

Myron Scholes' quote emphasizes that in finance, the only constant factor is the process of change itself. This means that financial markets, trends, and principles are never static; they evolve over time due to factors such as economic conditions, technological advancements, regulatory changes, or even human behavior. Investors should always expect uncertainty, adapt to new developments, and be prepared for continuous learning and adjustment in their strategies.

"Finance is not about making predictions. It's about dealing with uncertainty."

Myron Scholes' quote emphasizes that finance is less about predicting future events accurately, such as stock market movements or economic trends, and more about managing and navigating the inherent uncertainties within these fields. In essence, it suggests that understanding risk, volatility, and potential outcomes – rather than trying to precisely foresee specific outcomes – forms the core of financial decision-making. This mindset encourages investors to adopt prudent strategies focused on diversification, hedging risks, and maintaining flexibility in response to changing market conditions.

A futures contract is a derivative, but the futures exchange doesn't call them 'derivatives,' they call them 'futures.'

- Myron Scholes

Call, Derivatives, Contract

I was involved with Wells Fargo Bank as a consultant in the late 1960s and early 1970s, when I suggested to them that they develop a product that has become known as index funds.

- Myron Scholes

Product, Develop, Them, Funds

My view is that one should diversify broadly across different fund investments. However, it's tough for investors to try to pick the appropriate risk level that they should manage their funds at. Having a personal adviser would be helpful.

- Myron Scholes

However, Appropriate, Funds

If someone says to you, 'Go to an old-folks' home,' that's kind of ridiculous, because a lot of old people are doing terrific things for society.

- Myron Scholes

Doing, Kind, Old, Old People

Most of the time, your risk management works. With a systemic event such as the recent shocks following the collapse of Lehman Brothers, obviously the risk-management system of any one bank appears, after the fact, to be incomplete. We ended up where banks couldn't liquidate their risk, and the system tended to freeze up.

- Myron Scholes

Fact, Systemic, Works, Incomplete

My first reaction on being awarded the Nobel Prize was, actually, I thought of Fischer Black, my colleague. He unfortunately had passed away. And there was no doubt in my mind that if he were still alive, he would have been a co-recipient of the Nobel Prize.

- Myron Scholes

Thought, Away, Been, Fischer

I'm a theorist, not an institutionalist.

- Myron Scholes

Theorist

Keynesian modelling relies on marginal propensity to consume and marginal propensity to invest. The idea that if we give more money to the poor, they have a propensity to consume that's much higher than the wealthy, though I wish they would talk to my wife about that; she seems to have a propensity to consume.

- Myron Scholes

Wealthy, Idea, Invest, Marginal

Tax incentives might spur hiring in the short run, but how lasting are those gains if the jobs expire with the tax credits and they come at the expense of investing in the new technologies of the future?

- Myron Scholes

New, Might, Hiring, Investing

I think in our global economy, uncertainty is ever increasing. So to accommodate to that, we need to build a dynamic economy and dynamic rules that can adapt to changing circumstances.

- Myron Scholes

Think, Circumstances, Need, Accommodate

Innovation must lead infrastructure for a simple but compelling reason: Innovation produces new types of products and markets, and it is virtually impossible to know how to run those markets efficiently before they are created.

- Myron Scholes

Innovation, Reason, New, Produces

From an early age I was very, very fascinated by uncertainty.

- Myron Scholes

Very, Fascinated, Early Age

All models have faults - that doesn't mean you can't use them as tools for making decisions.

- Myron Scholes

Making, Use, Models, Making Decisions

The experience of the '90s, whether it's the '94 peso crisis or the '97 crisis in Asia, the '98 crisis, even the 2001 crisis, is that we recovered pretty readily. There wasn't great consequence.

- Myron Scholes

Crisis, Pretty, Consequence, Recovered

Sometimes the early bird gets the worm, but sometimes the early bird gets frozen to death.

- Myron Scholes

Death, Sometimes, Worm, Early Bird

If we internationalize everything, we end up with rules that stifle freedom and innovation.

- Myron Scholes

Innovation, Freedom, End, Stifle

My career in academic research has not been involved with active management of securities. I've tried to understand risk-and-return relationships; also the pricing of derivative securities.

- Myron Scholes

Career, Understand, Been, Derivative

Building a road might create temporary jobs, but does it really create wealth if it doesn't also shorten commute times or otherwise make society better off?

- Myron Scholes

Wealth, Temporary, Otherwise, Better Off

A bank needs models to measure risk. The problem, however, is that any one bank can measure its risk, but it also has to know what the risk taken by other banks in the system happens to be at any particular moment.

- Myron Scholes

Other, Needs, However, Models

Every side of a coin has another side.

- Myron Scholes

Another, Coin, Side, Every

If you're searching for quotes on a different topic, feel free to browse our Topics page or explore a diverse collection of quotes from various Authors to find inspiration.