Economist Stephen A. Ross, whose work has significantly impacted how market participants measure and address risk, has been awarded the inaugural Chicago Mercantile Exchange-Mathematical Sciences Research Institute (CME-MSRI) Prize in Innovative Quantitative Applications for his "innovative work in arbitrage pricing theories."
The award recognizes "individuals or groups who contribute original concepts and innovation in the use of mathematical, statistical or computational methods for the study of the behavior of markets, and more broadly of economics," according to CME and MSRI.
Ross, the Franco Modigliani Professor of Finance and Economics, said, "As the first recipient of the CME/MSRI award, I am deeply grateful to be recognized by these two prestigious organizations. CME is considered one of the most innovative financial institutions in the world. MSRI is one of the most esteemed mathematical research facilities in the world. This prize is a wonderful recognition by both of these organizations of the fundamental role that mathematics plays in finance and of the inspiration that finance provides mathematics."
The focus of much of Ross' work has been on understanding how markets price assets. He is the discoverer of the "no arbitrage theorem of asset pricing," the inventor of "arbitrage pricing theory," and the co-discoverer of risk-neutral pricing and the binomial model for pricing derivatives. He is a widely published author in finance and economics.
CME-MSRI prize selection committee member and CME Chairman Emeritus Leo Melamed said, "As leader in the field of arbitrage pricing, Dr. Ross' work has been an integral part of the risk management arena. His many contributions have significantly impacted how market participants measure, and in turn, address risk. He is a well-deserving recipient of our first CME/MSRI award and sets a high bar for others to follow."
David Eisenbud, CME-MSRI prize selection committee chairman and director of MSRI, said, "The work of Dr. Ross exemplifies the very remarkable development in recent years of the application of mathematics in economics. It is extraordinarily fitting to have CME, which is focused on innovation in a very practical field, and MSRI, which is concerned with innovation in a very fundamental sense, recognize his achievement. This is a great example of how the two fit together."
Ross was presented with the CME/MSRI Prize at a ceremony in late September in Chicago. In conjunction with the award ceremony, a seminar was held with Nobel laureates Myron Scholes and Robert Merton speaking on the uses of mathematics in economics and the study of markets.
A version of this article appeared in MIT Tech Talk on October 18, 2006 (download PDF).
