Robert C. Merton
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1997
Born: 31 July 1944, New York, NY, USA
Affiliation at the time of the award: Harvard University, Cambridge, MA, USA
Prize motivation: “for a new method to determine the value of derivatives”
Prize share: 1/2
Robert Merton was born in New York, USA. Although he enjoyed mathematics, his main interest while growing up was cars. After getting his driver’s licence, he built street hot rods that he ran at drag strips in upstate New York and Long Island. He studied at Columbia University, at California Institute of Technology and Massachusetts Institute of Technology and has taught economics at MIT and Harvard. Merton has three adult children.
Robert Merton is known for his work on finance theory and risk management and especially for his contribution to assessing the value of stock options and other derivatives. Merton used his background in mathematics to generalize the Black-Scholes formula, created by Myron Scholes and Fischer Black. By altering the formula, Merton allowed it to apply to other financial matters, such as mortgages and student loans.
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