Nobel Prize Winner Essay

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Robert C. Merton Biography Robert C. Merton was born on July 31, 1944 in New-York. He is the son of sociologist Robert King Merton and Suzanne Carhart. He has got two sisters Stephanie and Vanessa and grew up in Hastings-on-Hudson. Passionate for mathematics since he was young, he earned a bachelor's degree in engineering mathematics from Columbia University and a master's degree in applied mathematics from the California Institute of Technology. Then he decided to study economics and pursue a doctorate in the Massachusetts Institute of Technology under the guidance of Paul Samuelson. He started to teach finance at M.I.T's Sloan School of Management in 1969. In 1988, he decided to move from M.I.T. to Harvard Buisness School after a sabbatical year dedicated to the writing of his book Continuous-Time Finance. He returned to M.I.T in 2010. During ten years, he focus his research on developing dynamic models of optimal lifetime consumption and portfolio selection and equilibrium asset pricing then he decided to applicate those models during an other ten years. He wrote several articles and books throughout his career. The Nobel Prize Mr. Merton met Myron Scholes and Fischer Black when he was teaching at M.I.T. The two developed a formula for valuing stock options but could not get their work published before Mr. Merton applied some high-powered mathematics to the formula and produced an elegant elaboration that was quickly accepted for publication. This formula is now known throughout the financial world as Black-Scholes model and produced Nobel awards for Mr. Scholes and Mr. Merton in 1997 (Mr. Black died in 1995). The Black-Scholes formula The risk in the stock market is, if you buy a stock today, the price can drope in the future and you could loose money. But if you pay for an option contract, this gives you the right to wait and buy the stock if it

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