Q&A: Myron Scholes on LTCM, crisis lessons and the value of intermediation

Quants received a lot of flak for the crisis, but the profession is on the cusp of a golden age, according to Myron Scholes, co-inventor of the Black-Scholes pricing model. In an interview with Laurie Carver, he also criticises post-crisis regulation, discusses the value of intermediation – and the lessons he learned from the collapse of Long-Term Capital Management

The birth of quantitative finance is often dated back to the work of Louis Bachelier in 1900, but for the subsequent seven decades it won few converts – notable exceptions such as Benoît Mandelbrot aside – until the arrival of Fischer Black, Myron Scholes and Robert Merton.

In a series of seminal papers in the early 1970s, these three figures revolutionised trading through the now-famous Black