John C. Cox developed mathematical methods for option pricing and risk-neutral pricing. With Stephen A. Ross and Mark Rubinstein, he introduced the Cox--Ross--Rubinstein model, whose binomial price tree gives a particularly transparent example of a replicating portfolio.[ref]
Option Pricing: A Simplified Approach by John C. Cox and others. 1979, author list and the one-period replication argument
At each node, the two possible next-step payments determine the holdings in a stock and a riskless asset. Repeating this calculation by backward induction values the final payment through the tree. For an American option, the calculation also compares continuation value with the value of immediate exercise. This turns the distinction between European and American exercise rules into a concrete computational decision.[ref]
Option Pricing: A Simplified Approach by John C. Cox and others. Multiperiod model and valuation of options permitting early exercise
Institutional profile: mitsloan.mit.edu/faculty/directory/john-c-cox
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