Robert C. Merton

#3107
Most Popular
Boost

Birthday
Birthplace
New York City, New York
Birth Sign
Leo
Birthday

Robert C. Merton is an American economist who won the Nobel Prize in Economics for establishing a financial theory on stock derivative risk management. He also helped with the evaluation of stock options and derivatives. His Nobel Prize was shared with another economist, Myron S. Scholes, whose ‘Black-Scholes Formula’ for the value of options, established in partnership with Fischer Black, laid the groundwork for Merton’s work. Fischer Black, who died in 1995, was unable to share the Nobel Prize with Merton and Scholes. Merton’s research touched on a wide range of topics in finance and economics. His biggest contribution, which had the greatest influence, was his work on estimating the value of options. Prior to the advent of the ‘Black-Scholes Formula,’ determining the value of stock options that permitted investors to sell assets at any price at any time was extremely complex and risky. As a safety net against severe financial losses, investors used to factor in some hedge money as a risk premium into the price of options. Risk premiums are already included into the pricing of options, according to the ‘Black-Scholes Formula.’ Merton’s task was to refine this formula so that it could be used to a variety of situations, including mortgages and student loans.

Childhood and Adolescence

Robert C. Merton was born on July 31, 1944, in New York, New York State, United States of America. His father, Robert K. Merton, was a sociology professor at ‘Columbia University,’ and his mother, Suzanne Carhart, was a Methodist Quaker from New Jersey.

Stephanie was his older sister, and Vanessa was his younger sister.
He received his education at a Hastings-on-Hudson public school, where he graduated with ninety other pupils.
He aspired to be an automobile engineer as he grew up, and he even interned at Ford in Dearborn, Michigan, for two summers during his undergraduate years.

He received a ‘Faculty Scholarship Award’ in 1964 while studying Engineering Mathematics at ‘Columbia University.’

In 1966, he earned a bachelor’s degree in science.
From 1966 to 1967, he attended the ‘California Institute of Technology,’ where he earned his M.S. in Applied Mathematics in 1967.

He changed his major to economics at the ‘Massachusetts Institute of Technology,’ where he received his PhD in 1970.

Career of Robert C. Merton

In 1969, Robert C. Merton worked as a consultant for a bank in Southern California.
He worked as an instructor at MIT’s ‘Department of Economics’ from 1969 to 1970.

He was an Assistant Professor of Finance at the MIT’A. P. Sloan School of Management’ from 1970 to 1973, an Associate Professor from 1973 to 1974, and a Professor from 1974 to 1980. From 1980 until 1988, he was a ‘J. C. Penny Professor of Management’ at MIT.

Mathew Gladstein hired Merton and Myron Scholes to work at ‘Donaldson, Lufkin & Jenrette’ in 1972 to design a model for option pricing and hedge money, which they eventually replicated for the ‘Chicago Board Options Exchange.’

In 1979, he worked at the National Bureau of Economic Research as a Research Associate.
He was a ‘Visiting Professor of Finance’ at Harvard University’s Graduate School of Business Administration from 1987 to 1988.

From 1980 to 1988, he was a director of the ‘Nova Fund,’ a trustee of the ‘ABT Growth and Income Trust,’ a director of the ‘ABT Utility Income Fund,’ a director of the ‘Travelers Investment Management Company,’ and a trustee of the ‘College Retirement Equities Fund,’ from 1988 to 1996.

From 1982 to 1984, 1986, and 1987 to 1988, Merton served as Director of the ‘American Finance Association.’
In 1988, he joined the faculty of the ‘Harvard Business School,’ and from 1988 to 1998, he was a ‘George Fisher Baker Professor of Business Administration’ at the ‘Graduate School of Business Administration.’ In 1998, he was named the university’s first ‘John and Natty McArthur University Professor.’

From 1988 through 1992, he worked as a special consultant for the ‘Office of the Chairman’ of ‘Salomon.’
During June 1993, he was a ‘Invited Professor of Finance’ at the ‘Faculte des Sciences Economiques, Universite de Nantes.’

In 1983, he was named a Fellow of the ‘Econometric Society,’ a Fellow of the ‘American Academy of Arts and Sciences,’ a Member of the ‘National Academy of Sciences,’ a Senior Fellow of the ‘International Association of Financial Engineers,’ a Fellow of the ‘Institute for Quantitative Research in Finance,’ a Fellow of the ‘Institute for Quantitative Research in Finance,’ and an Honorary Member of the ‘Bachelier

From 1993 to 1996, he was Vice-President of ‘The Society for Financial Studies.’
From 1993 until 1998, Merton was a principal member and partner of the investment business ‘Long-Term Capital Management,’ and he sat on the editorial boards of several economic publications.

Major Projects of Robert C. Merton

Robert C. Merton has produced a number of economic treatises. In 1990, he wrote the book ‘Continuous-Time Finance.’

‘Cases in Financial Engineering: Applied Studies of Financial Innovation’ and ‘The Global Financial System: A Functional Perspective,’ both published in 1995, and ‘Finance and Financial Economies,’ published in 1998, were also co-authored by him.

Achievements & Awards

In 1971-72, MIT awarded Robert C. Merton the ‘Salgo-Noren Award for Excellence in Teaching,’ and in 1977-78, the ‘Graduate Student Council Teaching Award.’
In 1983, he was awarded the ‘Leo Melamed Prize’ by Chicago University, and in 1985-86, he was awarded the ‘First Prize, Roger Murray Prize Competition’ by the ‘Institute of Quantitative Research in Finance.’

In 1989, he was awarded the ‘Distinguished Scholar Award’ by the ‘Eastern Finance Association,’ and in 1993, he was awarded the ‘International INA-Accademia Nazionale dei Lincei Prize’ by the ‘National Academy of Lincei, Rome,’ the ‘FORCE Award for Financial Innovation’ by the ‘Fuqua School of Business, Duke University,’ and the ‘Financial Engineer of the Year Award’ by the ‘International

Merton was awarded the Nobel Prize in Economics in 1997.
In 1989, he was awarded an honorary ‘Master of Arts’ degree by Harvard University, and in 1991, an honorary ‘Doctor of Laws’ degree by the University of Chicago.

In 1995, he was named a ‘Professeur Honoris Causa’ of the Paris’ Hautes Etudes Commerciales,’ a ‘Doctoris Honoris Causa’ of the ‘University of Lausanne,’ and a ‘Doctoris Honoris Causa’ of the ‘University of Paris-Dauphine,’ in 1996, and a ‘Doctoris Honoris Causa’ of the ‘University of

In 1998, he was entered into the ‘Derivatives Hall of Fame’ after receiving a ‘Honorary Doctor’ degree from the ‘National Sun Yat-sen University.’

The ‘CME Group’ awarded him the ‘Melamed-Arditti Innovation Award’ in 2011, and the ‘World Federation of Exchanges’ awarded him the ‘WFE Award for Excellence’ in 2013.

Personal History and Legacy

Robert C. Merton married June Rose, a television actress and model, in 1966 and divorced her in 1996.
He has three children from his marriage: Samantha J., a daughter, and Robert F. and Paul J., two sons.

Trivia

He first became interested in vehicles when he was 11 years old, and at the age of 15, he built his own car and raced it on drag strips in Long Island and New York.