Merton, Robert C

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Robert Cox Merton (born July 31, 1944) was one of three men who, in the early 1970s, developed the mathematics of option pricing. Merton published a paper on the subject at the same time as 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. His work also included the use of optimal control theory in order to derive consumption and portfolio allocation rules for economically optimizing agents.

In 1997, two years after Fischer Black's death, Merton and Scholes received the Nobel Prize in Economics for their work on options

Currently, he is a professor at the Harvard Business School. Robert Merton and Myron Scholes were on the board of Long-Term Capital Management, a hedge fund founded by John Meriwether.

Key publications

  • Merton, RC 1992 Continuous-time Finance. Blackwell
  • Merton, RC 1973 Theory of rational option pricing. Bell Journal of Economics and Management Science 4 141-83
  • Merton, RC 1974 On the pricing of corporate debt: the risk structure of interest rates. Journal of Finance 29 449-70
  • Merton, RC 1976 Option pricing when underlying stock returns are discontinuous. Journal of Financial Economics 3 125-44
  • Merton, RC 1995 Influence of mathematical models in finance on practice: past, present and future. In Mathematical Models in Finance (ed. Howison, Kelly & Wilmott)'