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Robert Carhart Merton

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This article is about the economist. For the sociologist, see Robert K. Merton.

Robert Carhart Merton (born July 31, 1944), a leading scholar in the field of finance, was one of three men who, in the
early 1970s, developed the mathematics of the stock options markets. Merton published a paper on the subject
simultaneous with the publication of another paper, reaching essentially the same conclusions, by Fischer Black and
Myron S. Scholes.

It is somewhat unfair to Merton that the resulting formula has ever since been known as Black-Scholes, but with another
hyphen the label would be unwieldy.

He wrote a hugely successful book: Continous-time Finance.

Merton and Scholes received The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for their work
on stock options, in 1997, after Fischer Black's death.

In 2002, Merton threw himself into the public controversy over how corporations ought to account for the stock options
they often award as parts of a compensation package. Existing rules do not require that these options be treated as an
expense when issued, and some economists suspect that the practice of keeping this particular form of compensation off
the balance sheet contributed to the 1990s bubble in the value of dot-coms and telecoms. Merton himself is among the
advocates of stock options expensing.

Merton is also the son of Robert K. Merton, a distinguished sociologist perhaps best known for having coined the phrase
"self-fulfilling prophecy."

Merton was born in New York, New York and received his Bachelor of Science degree from the School of Engineering
and Applied Science of Columbia University. He is currently a professor at Harvard University and has also been on the
faculty at the MIT Sloan School of Management. Myron Scholes and Robert Merton were on the board of Long-Term
Capital Management, a hedge fund company founded by John Meriwether that folded in 1998.

See also
Robert Merton's homepage at the Harvard Business School (http://www.hbs.edu/units/finance/merton.html)
List of economists
List of economics consultancies and think tanks
new method to determine the value of derivatives. (http://alop.atspace.com/tui/merton-press.html)

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Categories: 1944 births | Economists | Prize in Economics winners | MIT alumni

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1 of 1 9/10/2005 8:49 PM