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Kreps Recognized for Innovation in Dynamic Choice, Equilibrium
September 2007
STANFORD GRADUATE SCHOOL OF BUSINESS - David M. Kreps, senior associate dean for academic affairs and the Theodore J. Kreps (no relation) Professor of Economics, is the 2007 recipient of the second annual Prize in Innovative Quantitative Applications given by CME Group and the Mathematical Sciences Research Institute (MSRI).
The organizations recognize 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. At a September ceremony at the Chicago Mercantile Exchange, Kreps was honored for his innovative work in dynamic choice and equilibrium. He received a medal and a $25,000 cash award. In conjunction with the award ceremony, a seminar titled “What’s the Deal with Private Equity” was held.
Kreps’ research in microeconomics has probed deeply into dynamic choice, in both single-person and multi-person settings. In 1979, he was part of a team that placed the concept of risk-neutral asset pricing in the framework of “martingale measures,” an approach that is now standard for the pricing and risk management of financial products. He has had influential insights across a host of different topics, including dynamic choice where parties exhibit a preference for flexibility or concern over the timing of resolution of uncertainty; processes of learning both in markets and in games; and models of reputation in repeated games, with applications to corporate culture and human resource management.
CME Group, the world’s largest and most diverse exchange, was formed by the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade. MSRI, based in Berkeley, Calif., exists to further mathematical research through broadly based programs in the mathematical sciences and closely related activities.
In acknowledging the award, Kreps said the alliance between the two orgnaizations “symbolizes how ivory-tower theory and on-the-ground practice develop hand-in-hand, each taking its turn leading and inspiring and then being led and inspired by the other. In finance, perhaps more than in any other branch of the economic sciences, practice and theory have had a fruitful partnership. I’m proud to have been able to contribute, and I’m deeply grateful for and honored by this prize.”
