Robert C. Merton

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Robert C. Merton
Robert Merton November 2010 03(1).jpg
Merton in 2010
Born (1944-07-31) July 31, 1944 (age 77)
Nationality American
Alma mater Columbia University
California Institute of Technology
Massachusetts Institute of Technology
Known for Black–Scholes–Merton model
ICAPM
Merton's portfolio problem
Merton model
Fractional Finance
Long-Term Capital Management
Awards Nobel Memorial Prize in Economic Sciences (1997)
Scientific career
Fields Finance, economics
Institutions Massachusetts Institute of Technology Harvard University
Doctoral advisor Paul Samuelson
Doctoral students Jonathan E. Ingersoll [1]
Robert Jarrow

Robert Cox Merton (born July 31, 1944) is an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management, known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes–Merton model. In 1993 Merton co-founded hedge fund Long-Term Capital Management.

Contents

In 1997 Merton Together with Myron Scholes were awarded the Nobel Memorial Prize in Economic Sciences for a method to determine the value of derivatives.

Merton's current research focus is on the topics of: lifecycle investing and retirement funding, measuring and monitoring systemic risks in macrofinance, and financial innovation coupled with changing dynamics in financial institutions. [2]

Biography

Merton was born in New York City to a Jewish father [3] sociologist Robert K. Merton and mother Suzanne Carhart who was from a "multigenerational southern New Jersey Methodist/Quaker family." [4] He grew up in Hastings-on-Hudson, NY. He earned a Bachelor of Science in Engineering Mathematics from the School of Engineering and Applied Science of Columbia University, a Masters of Science from the California Institute of Technology, and his doctorate in economics from the Massachusetts Institute of Technology in 1970 under the guidance of Paul Anthony Samuelson. He then joined the faculty of the MIT Sloan School of Management, where he taught until 1988. [5] Subsequently, Merton moved to Harvard University, where he was George Fisher Baker Professor of Business Administration from 1988 to 1998. He was the John and Natty McArthur University Professor from 1998-2010. He rejoined the MIT Sloan School of Management in 2010 when he went Emeritus.

Career

Robert C. Merton is the School of Management Distinguished Professor of Finance at the MIT Sloan School of Management. He is Resident Scientist at Dimensional Fund Advisors, where he developed a next-generation integrated pension-management solution system that addresses deficiencies associated with traditional defined-benefit and defined-contribution plans. Merton is University Professor Emeritus at Harvard University. He was the George Fisher Baker Professor of Business Administration (1988–98) and John and Natty McArthur University Professor (1998–2010) at the Harvard Business School. He previously served on the finance faculty of the Sloan School from 1970 until 1988. Merton received the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for a new methodology to value derivatives. He is past President of the American Finance Association, a member of the National Academy of Sciences and a fellow of the American Academy of Arts and Sciences. He holds honorary degrees from eighteen universities.

Merton’s research focuses on finance theory including lifecycle finance, optimal intertemporal portfolio selection, capital asset pricing, pricing of options, risky corporate debt, loan guarantees, and other complex derivative securities. He has also written on the operation and regulation of financial institutions. Merton’s current academic interests include financial innovation and dynamics of institutional change, controlling the propagation of macro financial risk, and improving methods of measuring and managing sovereign risk. He is the author of Continuous-Time Finance, and a co-author of Cases in Financial Engineering: Applied Studies of Financial Innovation and The Global Financial System: A Functional Perspective; Finance; and Financial Economics. Merton is a founding co-editor of the Annual Review of Financial Economics . [6]

Merton has also been recognized for translating finance science into practice. He received the inaugural Financial Engineer of the Year Award from the International Association of Financial Engineers in 1993, [7] which also elected him a senior fellow. Derivatives Strategy magazine named him to its Derivatives Hall of Fame as did Risk magazine to its Risk Hall of Fame. He also received Risk’s Lifetime Achievement Award for contributions to the field of risk management. A distinguished fellow of the Institute for Quantitative Research in Finance ('Q Group') and a fellow of the Financial Management Association, Merton received the Nicholas Molodovsky Award from the CFA Institute.

His first professional association with a hedge fund came in 1968. His advisor at the time, Paul Samuelson, brought him on board Arbitrage Management Company (AMC), to join founder Michael Goodkin and chief executive Harry Markowitz. AMC is the first known attempt at computerized arbitrage trading. After a successful run as a private hedge fund, AMC was sold to Stuart & Co. in 1971. [8] In 1993, Merton co-founded a hedge fund, Long-Term Capital Management, which earned high returns for four years but later lost $4.6 billion in 1998 and was bailed out by a consortium of banks and closed out in early 2000. [9]

Personal life

Merton married June Rose in 1966. They separated in 1996. They have three children: two sons and one daughter.[ citation needed ]

Honours and awards

Publications

See also

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References

  1. Ingersoll, Jonathan E. (1976), A contingent-claims valuation of convertible bonds and the optimal policies for call and conversion . Ph.D. dissertation, Massachusetts Institute of Technology.
  2. https://mitsloan.mit.edu/faculty/directory/robert-c-merton
  3. Florida Atlantic University Libraries: "American Jewish Recipients of the Nobel Prize" Archived April 2, 2015, at the Wayback Machine retrieved March 29, 2015
  4. 1 2 3 Robert C. Merton on Nobelprize.org OOjs UI icon edit-ltr-progressive.svg , accessed 11 October 2020
  5. Faculty research Department (2008). "Biography – Robert C. Merton". Harvard Business School. Archived from the original on June 8, 2007. Retrieved August 30, 2008.
  6. Lo, Andrew W.; Merton, Robert C. (December 5, 2009). "Preface to the Annual Review of Financial Economics". Annual Review of Financial Economics. 1 (1): 01–17. doi:10.1146/annurev-financial-071808-145225 . Retrieved September 16, 2021.
  7. Hittleman, Margo (August 19, 1997). "Robert Jarrow is cited as one of the world's leading finance theorists". Cornell Chronicle . Retrieved February 5, 2018. Past recipients of the Financial Engineer of the Year award include Robert Merton (Harvard), Fischer Black, Mark Rubinstein (Berkeley) and Stephen Ross (Yale).
  8. Goodkin, Michael. The Wrong Answer Faster: The Inside Story of Making the Machine that Trades Trillions. John Wiley & Sons, 2012
  9. Sears, Steven (July 8, 2017). "A Good Time for Caution in the Markets". Barron's . Retrieved February 5, 2018.
  10. Vane, Howard R.; Mulhearn, Chris (December 6, 2017). The Nobel Memorial Laureates in Economics: An Introduction to Their Careers and Main Published Works. Edward Elgar Publishing. ISBN   9781845426897. Archived from the original on December 6, 2017. Retrieved December 6, 2017 via Google Books.
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  15. Robert A. Jarrow Speech in Honor of Robert C. Merton 1999 Mathematical Finance Day Lifetime Achievement Award Archived December 12, 2011, at the Wayback Machine . bu.edu. April 25, 1999
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Awards
Preceded by
James A. Mirrlees
William Vickrey
Laureate of the Nobel Memorial Prize in Economics
1997
Served alongside: Myron S. Scholes
Succeeded by
Amartya Sen