98-J-3. Kobayashi, Takao and Terry A. Marsh, "An Economics Contribution that is In-the-Money", January 1998.

This paper is written as a tribute to Professors Robert Merton and Myron Scholes, winners of the 1997 Nobel prize in Economics, as well as to their collaborator, the late Professor Fischer Black. We first provide a brief review of their option pricing theory and illustrate how it is different from equilibrium valuation models that are based on the standard price theory. We also discuss how the Black-Scholes Formula and the option-replicating technique which underlie the B-S model led the financial technology innovation in the last quarter century. We then give a selective overview of the works of Merton and Scholes beyond option pricing. Finally we briefly address how these two great scholars in finance, as well as late Fischer Black, have been successful in steering prominent Wall Street firms.