The Chicago Mercantile Exchange (CME), the largest and most diverse financial exchange, through its Center for Innovation has partnered with the Mathematical Sciences Research Institute (MSRI) to award the second annual CME/MSRI Prize. This award is designed to 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.

CME and MSRI have awarded the 2007 CME/MSRI Prize in Innovative Quantitative Applications to David M. Kreps, Senior Associate Dean for Academic Affairs and the Theodore J. Kreps Professor of Economics at the Stanford University Graduate School of Business.

Kreps’s prolific and seminal research in microeconomics has probed deeply into dynamic choice in both singleperson and multiperson 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, in which 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.

As this year’s recipient, Kreps was presented with the CME/MSRI Prize medal and a cash award of US$25,000 at a recognition ceremony held on September 20, 2007, at CME in Chicago. In conjunction with the award ceremony, a seminar was held with Milton Harris of the University of Chicago; Nobel Laureate Myron Scholes of Platinum Grove Asset Management; last year’s CME/MSRI awardee, Stephen A. Ross of MIT Sloan School of Management; and Luigi Zingales of the University of Chicago Graduate School of Business on the topic “What’s the Deal with Private Equity?” Members of the CME/MSRI Prize Selection Committee were: Leo Melamed, CME Group Chairman Emeritus; Myron Scholes; Stephen A. Ross; Darrell Duffie, James I. Miller Professor of Finance, Stanford University Graduate School of Business; Hugo Sonnenschein, president emeritus and Adam Smith Distinguished Service Professor, University of Chicago; and David Eisenbud, former director of MSRI.