Robert Cox Merton (born July 31, 1944), a leading scholar in the
field of finance, was one of three men who, in the early 1970s, developed the
mathematics of the stock options markets. Merton published a paper on the
subject simultaneous with the publication of another paper, reaching essentially
the same conclusions, by Fischer Black and Myron S. Scholes. He obtained his PhD
in Economics from MIT in 1970, where, studying under Nobel laureate Paul
Samuelson, he helped introduce stochastic calculus into financial economics,
allowing the behavior of prices to be described in the precise language of
probability. He then applied optimal control theory in order to derive
consumption and portfolio allocation rules for economically optimizing agents,
and his work has paved the way for the now flourishing field of financial
engineering, which applies his methods to calculate prices for exotic
derivatives with arbitrary payoffs.

It is somewhat unfair to Merton that the resulting formula has ever since been
known as Black-Scholes, but with another hyphen the label would be unwieldy.

He wrote a hugely successful book: Continuous-time Finance.

Merton and Scholes received the Nobel Memorial Prize in Economics for their work
on stock options, in 1997, after Fischer Black's death.

In 2002, Merton threw himself into the public controversy over how corporations
ought to account for the stock options they often award as parts of a
compensation package. Existing rules do not require that these options be
treated as an expense when issued, and some economists suspect that the practice
of keeping this particular form of compensation off the balance sheet
contributed to the 1990s bubble in the value of dot-coms and telecoms. Merton
himself is among the advocates of stock options expensing.

Merton is also the son of Robert K. Merton, a distinguished sociologist perhaps
best known for having coined the phrase "self-fulfilling prophecy."

Merton was born in New York, New York and received his Bachelor of Science
degree in Engineering Mathematics from the School of Engineering and Applied
Science of Columbia University.[1] He then entered the Ph.d. program in Applied
Mathematics from Caltech from 1966-1967, and picked up an M.S. there, but then
transferred to the Ph.D. program in Economics at MIT. [2]. After receiving his
Ph.D. from MIT under the guidance of renowned economist Paul Samuelson, Merton
joined the faculty at the MIT Sloan School of Management. Currently, he is a
professor at the Harvard Business School; he also holds the rank of University
Professor, which is the highest professorial rank at Harvard University. Robert
Merton and Myron Scholes were on the board of Long-Term Capital Management, a
hedge fund company founded by John Meriwether that folded in 1998.

`
LIST OF NOBEL PRIZE WINNERS IN ECONOMY`

Akerlof, George A.

Allais, Maurice

Arrow, Kenneth J.

Aumann, Robert J.

Becker, Gary S.

Buchanan, James M., Jr.

Coase, Ronald H.

Debreu, Gerard

Engle, Robert F.

Fogel, Robert W.

Friedman, Milton

Frisch, Ragnar

Granger, Clive W. J.

Haavelmo, Trygve

Harsanyi, John C.

Heckman, James J.

Hayek, Friedrich August Von

Hicks, Sir John R.

Kahneman, Daniel

Kantorovich, Leonid Vitaliyevich

Klein, Lawrence R.

Koopmans, Tjalling C.

Kuznets, Simon

Kydland, Finn E.

Leontief, Wassily

Lewis, Sir Arthur

Lucas, Robert

Markowitz, Harry M.

McFadden, Daniel L.

Meade, James E.

Merton, Robert C.

Miller, Merton M.

Mirrlees, James A.

Modigliani, Franco

Mundell, Robert A.

Myrdal, Gunnar

Nash, John F.

North, Douglass C.

Ohlin, Bertil

Prescott, Edward C.

Samuelson, Paul A.

Schelling, Thomas C.

Scholes, Myron S.

Schultz, Theodore W.

Selten, Reinhard

Sen, Amartya

Sharpe, William F.

Simon, Herbert A.

Smith, Vernon L.

Solow, Robert M.

Spence, A. Michael

Stigler, George J.

Stiglitz, Joseph E.

Stone, Sir Richard

Tinbergen, Jan

Tobin, James

Vickrey, William

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