A Nobel Formula: Time, Risk, and the Value of Waiting

Introduce e modera:
Salvatore Greco
Università degli Studi di Catania

ABSTRACT: In 1997 the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was jointly awarded to Robert Merton and Myron Scholes "for a new method to determine the value of derivatives.” Codeveloped with Fischer Black (untimely passed away in 1995), their theoretical work changed finance forever. Based on a mathematical model for the dynamics of the price of a financial asset, they obtained a formula to price options and several complex financial instruments. The formula ignited options trading, providing mathematical legitimacy to the Chicago Board Options Exchange and other financial markets around the world. The wind in the sails of finance turned into two major global crises in 1987 and 2008, and one was barely averted in 1998. This talk recounts the formula and its aftermath.

BIO: Marco Li Calzi è professore ordinario di Metodi Matematici per l'Economia presso l’Università Ca' Foscari Venezia dal 1994. Ha conseguito un dottorato in Decision Sciences presso la Stanford University nel 1993. I suoi principali interessi di ricerca riguardano la teoria dei giochi.