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Robert C. Merton

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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.<ref name="Bodie"/><ref name="Andrew">Template:Cite journal</ref><ref name="Carr">Template:Cite news</ref> In 1997 Merton together with Myron Scholes were awarded the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for the method to determine the value of derivatives.<ref name="nobelprize.org"/><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Merton was on the board of directors of Long-Term Capital Management (LTCM), a highly leveraged hedge fund that collapsed in 1998, wiping out most of the value paid in by the investors, and requiring a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Merton's current research focus is on the topics of lifecycle investing<ref name="Zvi">Template:Cite journal</ref> and retirement funding,<ref name="Pechter">Template:Cite news</ref> measuring and monitoring systemic risks in macrofinance,<ref name="Gray">Template:Cite journal</ref> and financial innovation coupled with changing dynamics in financial institutions.<ref name="MIT">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Early life and educationEdit

Merton was born in New York City to sociologist Robert K. Merton and Suzanne Carhart, who was from a "multigenerational southern New Jersey Methodist/Quaker family."<ref name="nobelprize.org">Template:Nobelprize</ref> He grew up in Hastings-on-Hudson, New York.<ref name="nobelprize.org"/>

Merton 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 Samuelson.<ref name="Bodie">Template:Cite journal</ref>

CareerEdit

In 1970 Merton joined the faculty of the MIT Sloan School of Management, where he taught until 1988.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> 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 to 2010, becoming professor emeritus at Harvard University in 2010.<ref name="MIT"/><ref name="HBS">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

In 2010 Robert C. Merton rejoined the MIT Sloan School of Management<ref>Template:Cite news</ref> where he is the School of Management Distinguished Professor of Finance.<ref name="MIT"/> Since 2010, he also has been a Resident Scientist at Dimensional Fund Advisors, working on pension management.<ref name="Garcia-Feijóo">Template:Cite book</ref>

Merton received the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for a new methodology to value derivatives.<ref name="nobelprize.org"/> He is past President of the American Finance Association (1986),<ref name="AFA"/> a member of the National Academy of Sciences (1993)<ref name="NAS"/> and a fellow of the American Academy of Arts and Sciences.<ref name="Vane"/>

He remained on the faculty at MIT in 2021.<ref>Template:Citation</ref>

ResearchEdit

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 was a founding co-editor of the Annual Review of Financial Economics, serving from 2009 to 2021.<ref>Template:Cite journal</ref><ref name="Lo">Template:Cite journal</ref>

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,<ref>Template:Cite news</ref> which also elected him a senior fellow. Derivatives Strategy magazine named him to its Derivatives Hall of Fame in 1998<ref name="Persson">Template:Cite book</ref> as did Risk magazine to its Risk Hall of Fame in 2002. He also received Risk's Lifetime Achievement Award for contributions to the field of risk management in 2003.<ref name="Read">Template:Cite book</ref> A distinguished fellow of the Institute for Quantitative Research in Finance ('Q Group', 1997)<ref name="nobelprize.org"/> and a fellow of the Financial Management Association (2000),<ref name="FMA"/> Merton received the Nicholas Molodovsky Award for Outstanding Contribution to Investment Research from the CFA Institute (2003).<ref name="CFA">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

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.<ref>Goodkin, Michael. The Wrong Answer Faster: The Inside Story of Making the Machine that Trades Trillions. John Wiley & Sons, 2012</ref> 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.<ref>Template:Cite news</ref><ref name="Edwards">Template:Cite journal</ref>

Personal lifeEdit

Merton married June Rose in 1966. They separated in 1996. They have three children: two sons and one daughter.<ref name="NBio">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref>

Honours and awardsEdit

  • In 1986, Merton became a Fellow at the American Academy of Arts and Sciences.<ref name="Vane">Template:Cite book</ref>
  • In 1986, Merton was President of the American Finance Association.<ref name="AFA">{{#invoke:citation/CS1|citation

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  • In 1993, Merton was awarded the International INA - Accademia Nazionale dei Lincei Prize, National Academy of Lincei, Rome.<ref name="nobelprize.org"/>
  • In 1993, Merton won the inaugural Financial Engineer of the Year Award by the International Association of Financial Engineers (since renamed International Association for Quantitative Finance).<ref name="Vane"/>
  • In 1994, Merton became of Senior Fellow at the International Association of Financial Engineers (since renamed International Association for Quantitative Finance)<ref>{{#invoke:citation/CS1|citation

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  • In 1997, Merton became a Distinguished Fellow at the Institute for Quantitative Research in Finance ('Q Group').<ref name="nobelprize.org"/>
  • In 1997, Merton was awarded the Nobel Memorial Prize in Economic Sciences with Myron Scholes for their work on stock options.<ref>Template:Cite journal</ref>
  • In 1998, Merton was awarded the Michael I. Pupin Medal for Service to the Nation from Columbia University.<ref>{{#invoke:citation/CS1|citation

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  • In 2000, Merton became a Fellow at the Society of Fellows, American Finance Association.<ref>{{#invoke:citation/CS1|citation

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  • In 2003 Merton received the Nicholas Molodovsky Award for Outstanding Contribution to Investment Research from the CFA Institute.<ref name="CFA"/>
  • In 2005 the Baker Library at Harvard University opened The Merton Exhibit in his honor.<ref>{{#invoke:citation/CS1|citation

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  • In 2009, Merton was awarded the Robert A. Muh Award in the Humanities, Arts and Social Sciences from Massachusetts Institute of Technology.<ref>{{#invoke:citation/CS1|citation

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  • In 2009, Merton was awarded the Tjalling C. Koopmans Asset Award from Tilburg University.<ref>{{#invoke:citation/CS1|citation

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  • In 2010, Merton received the Kolmogorov medal from the University of London.<ref>The Kolmogorov Lecture and Medal Template:Webarchive. Kolmogorov.clrc.rhul.ac.uk (November 13, 2009). Retrieved on January 29, 2012.</ref>
  • In 2010, Merton received the Hamilton Medal from the Royal Irish Academy.<ref>{{#invoke:citation/CS1|citation

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  • In 2011, Merton received the CME Group Melamed-Arditti Innovation Award.<ref>{{#invoke:citation/CS1|citation

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  • In 2013, Merton received the WFE Award for Excellence from the World Federation of Exchanges.<ref>{{#invoke:citation/CS1|citation

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  • In 2014, Merton received the Lifetime Achievement Award from the Financial Intermediation Research Society.<ref>{{#invoke:citation/CS1|citation

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  • In 2017, Merton received the Finance Diamond Price from the Fundacion de Investigacion IMEF, Mexico.<ref>{{#invoke:citation/CS1|citation

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  • In 2022, Merton received a Lifetime Achievement Award from the Plan Sponsor Council of America (PSCA).<ref name="PSCA">Template:Cite news</ref>

PublicationsEdit

  • Theory of rational option pricing (1973) [1]

See alsoEdit

ReferencesEdit

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External linksEdit

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