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Robert C. MertonFrom Wikipedia, the free encyclopedia
Robert Carhart Merton (born 31 July 1944) is an American economist, university professor and Nobel laureate in economics.
BiographyMerton was born in New York City to sociologist Robert K. Merton and Suzanne Carhart. 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.[1] Subsequently, Merton moved to Harvard University, where he was George Fisher Baker Professor of Business Administration from 1988 to 1998 and has held the John and Natty McArthur University Professorship since 1998. On June 11, 2010 it was announced[2] that Merton would retire from Harvard and rejoin the MIT Sloan School of Management. Merton also sits on the QFINANCE Strategic Advisory Board. CareerMerton has made several seminal contributions for which Samuelson has hailed him as the Newton of Modern Finance. In 1969, Merton published Merton's portfolio problem, which proposed a formula to enable people to decide how much of their income they can consume at present and how much of the remainder should be allocated toward investments. In 1970, he introduced the Merton Model, which treated equity as an option on a firm's assets, and introduced the use of continuous-time default probabilities to model options on the common stock of a company. This was extended by Merton's student Robert A. Jarrow and Stuart Turnbull and is known as the Jarrow-Turnbull model. In 1973, Merton introduced the Intertemporal Capital Asset Pricing Model ICAPM, which incorporates explicit hedges that investors make to protect themselves from savings shortfalls. He published the Merton model for pricing European options (1973), which is an elegantly derived, more generalized pricing formula than the Black-Scholes model. Together, they constitute the Nobel Prize winning Black-Scholes-Merton model. Merton has extensively consulted for the industry. These efforts have sometimes ended badly. Together with Myron Scholes, Merton was among the board of directors of Long-Term Capital Management (LTCM), a hedge fund that failed spectacularly in 1998 after losing $4.6 billion in less than four months.[3] The Federal Reserve was so concerned about the potential impact of LTCM's failure on the financial system that it arranged for a group of 19 banks and other firms to provide sufficient liquidity for the banking system to survive. Although these investors were eventually paid off, the reputation of Merton and Scholes were tarnished. In 2007, Merton was hired as Chief Science Officer of Trinsum Group, a financial advisory firm. On January 30, 2009 Trinsum Group put the following press statement on its website,
In June 17, 2010, he rejoined his alma mater Massachusetts Institute of Technology as a professor in the MIT Sloan School of Management, where he had earlier taught from 1970-1988 after completing his PhD.[5] Personal lifeMerton was married to June Rose from 1966 to 1996. They have three children; two sons and one daughter. Honours and awardsIn 1993, Merton became a member of the U.S. United States National Academy of Sciences. In 1997, Merton was awarded the Nobel Memorial Prize in Economic Sciences with Myron Scholes for their work on stock options.[6] In 1999, Merton was awarded a lifetime achievement award in mathematical finance.[7] In 2002 Merton entered the debate over how corporations ought to account for the stock options they award as part of a compensation package. Merton was among those advocating expensing stock options. Shortly afterward, the Financial Accounting Standards Board changed their rules and began to require the expensing of options. In 2005 the Baker Library at Harvard University opened The Merton Exhibit in his honor.[8] In 2006, Merton developed SmartNest, a pension management solution that addresses deficiencies associated with traditional defined-benefit and defined-contribution plans.[9] See alsoReferences
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Categories: 1944 births | Living people | American economists | American Jews | California Institute of Technology alumni | Columbia University alumni | Columbia Engineering Alumni | Financial economists | Harvard University faculty | Jewish American scientists | Long-Term Capital Management | Massachusetts Institute of Technology alumni | Massachusetts Institute of Technology faculty | Members of the National Academy of Sciences | Nobel laureates in Economics | American Nobel laureates |
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