Louis O. Scott, The Stationarity of the Conditional Mean of Real Rates of Return on Common Stocks: An Empirical Investigation, The Journal of Financial and Quantitative Analysis, Vol. 19, No. 2 (Jun., 1984), pp. 217-230

A method for estimating the marginal rate of substitution in the intertemporal capital asset pricing model is presented. The marginal rate of substitution is treated as an unobservable and one-period returns are used to develop a method of moments estimator that is consistent. Consistency depends on both a large number of time observations and a large number of securities. In the last section of the paper, the estimates of the marginal rate of substitution are used to test whether stock prices are unbiased predictors of ex post market fundamentals.

Marc Chesney, Louis Scott, Pricing European Currency Options: A Comparison of the Modified Black- Scholes Model and a Random Variance Model, The Journal of Financial and Quantitative Analysis, Vol. 24, No. 3 (Sep., 1989), pp. 267-284

Solutions are presented for prices on interest rate options in a two-factor version of the Cox–Ingersoll–Ross model of the term structure. Specific solutions are developed for caps on floating interest rates and for European options on discount bonds, coupon bonds, coupon bond futures, and Euro-dollar futures. The solutions for the options are expressed as multivariate integrals, and we show how to reduce the calculations to univariate numerical integrations, which can be calculated very quickly. The two-factor model provides more flexibility in fitting observed term structures, and the fixed parameters of the model can be set to capture the variability of the term structure over time.