Stephen Alan "Steve" Ross (February 3, 1944 – March 3, 2017) was the inaugural

Franco Modigliani Franco Modigliani (18 June 1918 – 25 September 2003) was an Italian-American economist and the recipient of the 1985 Nobel Memorial Prize in Economics. He was a professor at University of Illinois at Urbana–Champaign, Carnegie Mellon Univ ...

Professor of

Financial Economics Financial economics, also known as finance, 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". William F. Sharpe"Financi ...

at the

MIT Sloan School of Management The MIT Sloan School of Management (MIT Sloan or Sloan) is the business school of the Massachusetts Institute of Technology, a private university in Cambridge, Massachusetts. MIT Sloan offers bachelor's, master's, and doctoral degree programs, as ...

after a long career as the

Sterling Professor Sterling Professor, the highest academic rank at Yale University, is awarded to a tenured faculty member considered the best in his or her field. It is akin to the rank of university professor at other universities. The appointment, made by the ...

of Economics and Finance at the

Yale School of Management The Yale School of Management (also known as Yale SOM) is the graduate business school of Yale University, a private research university in New Haven, Connecticut. The school awards the Master of Business Administration (MBA), MBA for Executive ...

. He is known for initiating several important theories and models in

financial economics Financial economics, also known as finance, 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". William F. Sharpe"Financi ...

. He was a widely published author in finance and economics, and was a coauthor of a best-selling Corporate Finance textbook. He received his BS with honors from Caltech in 1965 where he majored in physics, and his PhD in economics from

Harvard Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher l ...

in 1970, and taught at the

University of Pennsylvania The University of Pennsylvania (also known as Penn or UPenn) is a Private university, private research university in Philadelphia. It is the fourth-oldest institution of higher education in the United States and is ranked among the highest- ...

, and

MIT The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the m ...

. 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 In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" ( lattice based) model of the varying price over time of the underlying fin ...

(1979; also known as the

Cox–Ross–Rubinstein model In finance, the binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" ( lattice based) model of the varying price over time of the underlying fin ...

). 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 In mathematical finance, the Cox–Ingersoll–Ross (CIR) model describes the evolution of interest rates. It is a type of "one factor model" (short-rate model) as it describes interest rate movements as driven by only one source of market ...

for interest rate dynamics. Such theories have become an important part of the paradigm known as

neoclassical finance Neoclassical finance is an approach within finance, developing since the mid-1960s, which holds that markets are efficient, and that prices will thus tend to equilibrium and be "rational"; and asset pricing models must then reflect these. It may ...

. 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 The International Association for Quantitative Finance (IAQF), formerly the International Association of Financial Engineers (IAFE), is a non-profit professional society dedicated to fostering the fields of quantitative finance and financial engin ...

' Financial Engineer of the Year in 1996. He gave the inaugural lecture of the Princeton Lectures in Finance, sponsored by the Bendheim Center for Finance of

Princeton University Princeton University is a private 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 nin ...

, in 2001. It became a book in 2004, presenting

and defending it, including such notions as the

efficiency Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...

and

rationality Rationality is the quality of being guided by or based on reasons. In this regard, a person acts rationally if they have a good reason for what they do or a belief is rational if it is based on strong evidence. This quality can apply to an ab ...

of markets, against its critics, especially those who belong to the behavioral finance tradition. Ross was a recipient of a 2006

Smith Breeden Prize ''The Journal of Finance'' is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946 and is considered to be one of the premier finance journals. The editor-in-chief ...

, a 2012

Onassis Prize The Alexander S. Onassis Foundation () was created by Aristotle Onassis to honor the memory of his son Alexander, who died at age 24 in an airplane crash in 1973. Aristotle Onassis died in 1975, and had directed in his will that half of his estat ...

, a 2014 Morgan Stanley - AFA Award for Excellence in Finance, as well as a 2015

Deutsche Bank Prize 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.

for developing models used for assessing prices for options and other assets in the previous 30 years. Ross chaired the theses of a number of prominent economists, including John Y. Campbell,

Douglas Diamond Douglas Warren Diamond (born October 25, 1953) is an American economist. He is currently the Merton H. Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, where he has taught since 1979. Diamond ...

, Philip H. Dybvig, and

William N. Goetzmann William N. Goetzmann (born February 4, 1956) is the Edwin J. Beinecke Professor of Finance and Management Studies at the Yale School of Management, and a research associate of the National Bureau of Economic Research. In 2018, he received the Jam ...

. Two of his former students,

and Philip H. Dybvig, won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2022.

References

External links

Sloan Faculty Profile

* * {{DEFAULTSORT:Ross, Stephen 1944 births 2017 deaths Financial economists American economists Harvard Graduate School of Arts and Sciences alumni University of Pennsylvania faculty Yale University faculty Fellows of the Econometric Society California Institute of Technology alumni MIT Sloan School of Management faculty Corporate finance theorists Yale Sterling Professors Fellows of the American Academy of Arts and Sciences Presidents of the American Finance Association