Faculty & Research

Stephen Ross

  • Franco Modigliani Professor of Financial Economics
  • Professor of Finance

Stephen A. Ross, the Franco Modigliani Professor of Financial Economics and a Professor of Finance at the MIT Sloan School of Management, passed away suddenly on March 3, 2017.

He was previously the Sterling Professor of Economics and Finance at Yale University and before that, a professor of economics and finance at the Wharton School of the University of Pennsylvania. Ross was a cofounder and principal of Ross, Jeffrey & Antle LLC, an investment advisory firm specializing in using options to enhance the performance of institutional portfolios.

Ross authored more than 100 articles in economics and finance and coauthored an introductory textbook in finance. He is probably best known for having invented the Arbitrage Pricing Theory and the Theory of Agency, and as the codiscoverer of risk-neutral pricing and of the binomial model for pricing derivatives. Models developed by Ross and his coworkers, including term structure models and option pricing models, are now standards for pricing in major securities trading firms. More recently, Ross discovered the Recovery Theorem, which enables the extraction or “recovery” from options prices the market’s probability distribution for future returns.

He received numerous prizes and awards, including the 2015 Deutsche Bank Prize in Financial Economics; the 2012 Onassis Prize for Finance, the Graham and Dodd Award for financial writing; the Pomerance Prize for excellence in the area of options research; the University of Chicago’s Leo Melamed Prize for the best research by a business school professor; and the 1996 IAFE Financial Engineer of the Year Award. In 2006, he was the first recipient of the CME-MSRI Prize in Innovative Quantitative Application, and in 2007 he won the Jean-Jacques Laffont Prize given by the Toulouse School of Economics.

Ross was a Fellow of the Econometric Society and a member of the American Academy of Arts and Sciences.

Ross served as president of the American Finance association and was a consultant to a number of investment banks and major corporations. He served as an advisor to government departments such as the U.S. Treasury, the Commerce Department, the Internal Revenue Service, and the EXIM Bank. He served as chairman of the American Express Advisory Panel and as director of General Re, Freddie Mac and CREF. He was also a senior trustee of the California Institute of Technology (CalTech) and served as an associate editor of several economics and finance journals.

He held a BS in physics from CalTech and a PhD in economics from Harvard University. 

Learn more about his life and work.