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Robert Merton

Robert C. Merton, 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.

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."

See also