Robert C. Merton Biography, Age, Weight, Height, Friend, Like, Affairs, Favourite, Birthdate & Other

Robert C. Merton is an American economist who received the Nobel Prize in Economics for his work on developing a financial theory on the risk management of stock derivatives. He also contributed to the assessment of stock options and derivatives. He shared the Nobel Prize with another economist Myron S. Scholes whose Black-Scholes Formula for the valuation of options, developed in collaboration with Fischer Black, provided the basic foundation for Merton’s work. Fischer Black could not share the Nobel Prize with Merton and Scholes as he had died in 1995.

Merton’s research work covered a large number of aspects related to finance and economics. His main work which probably produced the maximum impact was the work on determining the value of options. Before the development of the Black-Scholes Formula it was very difficult and risky to determine the value of stock options which allowed the investors to sell the assets at any price at any point of time. The investors used to incorporate some hedge money as a risk premium into the price of options as safety measure against major financial losses.

The Black-Scholes Formula showed that risk premiums are already factored into the price of options. Merton’s work was to elaborate this formula so that it could be generalized for other things such as mortgages and student loans.