Robert C. Merton

John and Natty McArthur University Professor, Emeritus

Robert C. Merton is University Professor Emeritus at Harvard Business School, where he was the George Fisher Baker Professor of Business Administration from 1988 to 1998 and the John and Natty McArthur University Professor from 1998 until his retirement in 2010.  He is currently the School of Management Distinguished Professor of Finance at MIT’s Sloan School of Management, where he previously served on the finance faculty from 1970 until 1988. Merton is past President of the American Finance Association, a member of the National Academy of Sciences and a fellow of the American Academy of Arts and Sciences. He received the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for a new method to determine the value of derivatives.

Connecting Web Sites

MIT Web Site

Nobel Prize Biography
Nobel Prize Lecture
Theses of MIT Alumni Nobel Prize Winners
Columbia University SEAS latest Nobel Laureate: Robert C. Merton
N ova documentary about the Black-Merton-Scholes Formula. The film tells the fascinating story of the invention of the Black-Scholes Formula, a mathematical Holy Grail that forever altered the world of finance and earned its creators the 1997 Nobel Prize in Economics.
Petra Conference of Nobel Laureates, Jordan 2005
Bodie-Merton FINANCE textbook
Bodie-Merton-Cleeton FINANCIAL ECONOMICS textbook
Derivatives Sourcebook Web site maintained by MIT LFE. A project to illustrate the wide application of option pricing theory. We have collected, categorized and indexed a list of over 1400 research articles since 1980 that have cited the option-pricing research of Fischer Black, Robert Merton, and Myron Scholes.

Listing of Education, Appointments, and Awards

Education

B.S., Columbia University (Engineering Mathematics), 1966
M.S., California Institute of Technology (Applied Mathematics), 1967
Ph.D., Massachusetts Institute of Technology (Economics), 1970

Honorary Degrees

Masters of Arts, Harvard University, 1989
Doctor of Laws, University of Chicago, 1991
Professeur Honoris Causa, Hautes Etudes Commerciales (France), 1995
Doctor of Economic Science (honoris causa), University of Lausanne, 1996
Doctoris Honoris Causa, University Paris-Dauphine, 1997
Doctor of Management Science (honoris causa), National Sun Yat-sen University, 1998
Doctor of Science (honoris causa), Athens University of Economics and Business, 2003
Doctor Honoris Causa , Universidad Nacional Mayor de San Marcos, Lima, Peru, 2004
Doctor of Philosophy Honoris Causa, Universidad Nacional Federico Villarreal, Lima, Peru, 2004
Doctor of Science, Honoris Causa, Claremont Graduate University, 2008 

Academic Appointments

School of Management Distinguished Professor of Finance, A.P. Sloan School of Management Massachusetts Institute of Technology, 2010 –
University Professor Emeritus, Harvard University, 2010 –
John and Natty McArthur University Professor, Graduate School of Business Administration, Harvard University,1998-2010
George Fisher Baker Professor of Business Administration, Graduate School of Business Administration, Harvard University, 1988-1998
Invited Professor of Finance, Faculte des Sciences Economiques, Universite de Nantes, June 1993
Visiting Professor of Finance, Graduate School of Business Administration, Harvard University, 1987-1988
J.C. Penney Professor of Management, A.P. Sloan School of Management, Massachusetts Institute of Technology,1980-1988
Assistant Professor of Finance, 1970-73, Associate Professor, 1973-74; Professor 1974-80, A.P. Sloan School of Management, Massachusetts Institute of Technology
Research Associate, National Bureau of Economic Research (1979- )
Instructor, Department of Economics, Massachusetts Institute of Technology, 1969-1970
Research Assistant to Paul Samuelson, Massachusetts Institute of Technology, 1968-1970
Other Professional Appointments

Current:

Resident Scientist, Dimensional Fund Advisors (2009- )
Chairman, Board of Directors, Daedalus Software, Inc. (2008- )
Member, Board of Directors, Dimensional SmartNest LLC (2010-)
Member, Board of Directors, Peninsula Banking Group (2003- )
Member, Board of Directors, Community First Financial Group (2003- )
Member, Board of Directors, Vical Inc. (2002- )
Member Quantitative Finance Advisory Board, Department of Applied Mathematics and Statistics, Stony Brook University (2009- )
Member, Board of Advisors, Santa Clara University Center for Innovation in Finance & Investment (2008-  )
Member, International Advisory Board, Middle East Science Fund (2008- )
Member, Board of Policy Advisers, Chinese Academy of Sciences Research Center on Fictitious Economy & Data Science (2008- )
Member, Competitive Markets Advisory Council, CME Group (2004-)
Member, Academic Advisory Board, Real Options Group (1999- )

Past:

Member, MIT Sloan Finance Group Advisory Board (2008-2010)
Member, Board of Directors, Dimensional Funds (2003-2009)
Member, Board of Directors, MF Risk, Inc. (2001-2009)
Senior Advisor, Platinum Grove Asset Management (2008)
Chief Science Officer, Trinsum Group (2007-2008) 
Member, Board of Directors, Trinsum Group (2007-2008)
Member, Board of Directors, Integrated Finance Limited (2002-2007)
Co-Founder, Chief Science Officer, Integrated Finance Limited (2002-2007)
Managing Director, J.P. Morgan Chase (2001)
Senior Advisor, J.P. Morgan & Company, Inc. (1999-2000)
Co-Founder, Management Committee, Long-Term Capital Management, L.P. (1993-1999)
Senior Advisor, Salomon Inc. (1988-1992)
Member, Board of Trustees, College Retirement Equities Fund (1988-1996)
Member, Board of Directors, Travelers Investment Management Company (1987-1991)
Member, Board of Directors, ABT Investment Series (1983-1988)
Member, Board of Directors, ABT Utility Income Fund (1982-1988)
Member, Board of Trustees, ABT Growth and Income Trust (1982-1988)
Member, Board of Directors, Nova Fund (1980-1988)
Member, Advisory Board, AlphaSimplex Group, Cambridge, MA (2001-2007)
Member, Advisory Board, nuServe (2001- 2004)
Member, Advisory Board, eCredit.com (2000-2002 )


Elected Societies and Positions

Member, Tau Beta Pi, Columbia University, 1965
Member, Sigma Xi, Massachusetts Institute of Technology, 1970
Director, American Finance Association, 1982-84; 1987-88
Fellow, Econometric Society, 1983-
Fellow, American Academy of Arts and Sciences, 1986-
President, American Finance Association, 1986
Vice President, The Society for Financial Studies, 1993
Member, National Academy of Sciences, 1993-
Senior Fellow, International Association of Financial Engineers, 1994-
Distinguished Fellow, Institute for Quantitative Research in Finance ('Q Group'), 1997-
Honorary Member, the Bachelier Finance Society, 1997-
Member, The Honorable Order of Kentucky Colonels, Commonwealth of Kentucky, 1999-
FMA Fellow, Financial Management Association, 2000-
Fellow, Society of Fellows, American Finance Association, 2000-
Member, Honorary Board, The International Raoul Wallenberg Foundation, 2003-
Member, Honorary Board, Angelo Roncalli International Committee, 2003-

Awards

1964 Faculty Scholar Award, Columbia University
1971-72 Salgo-Noren Award for Excellence in Teaching, Massachusetts Institute of Technology
1977-78 Graduate Student Council Teaching Award, Massachusetts Institute of Technology
1983 Leo Melamed Prize, University of Chicago
1985, 1986 First Prize, Roger Murray Prize Competition, Institute for Quantitative Research in Finance
1989 Distinguished Scholar Award, Eastern Finance Association
1993 International INA - Accademia Nazionale dei Lincei Prize, National Academy of Lincei, Rome
1993 FORCE Award for Financial Innovation, Fuqua School of Business, Duke University
1993 Financial Engineer of the Year Award, International Association of Financial Engineers
1997 Alfred Nobel Memorial Prize in Economic Sciences
1997 'Heroes Among Us,' Boston Celtics, Boston
1998 Inducted, Derivatives Hall of Fame, Derivatives Strategy Magazine
1998 Michael I. Pupin Medal for Service to the Nation, Columbia University
1999 Distinguished Alumni Award, California Institute of Technology
1999 Mathematical Finance Day Lifetime Achievement Award, Boston University
2002 Risk Hall of Fame, Risk Magazine
2003 Lifetime Achievement Award, Risk Magazine
2003 Nicholas Molodovsky Award, Association for Investment Management and Research (now CFA Institute)
2004 Graham and Dodd Award for the Best Perspectives Article in 2003, Financial Analyst Journal
2005 establishment of The Robert C. Merton (1970) Professorship in Financial Economics, Massachusetts Institute of Technology
2006 PRIMIA Higher Standard Award, Professional Risk Managers' International Association
2007 40 People of Power & Influence in Finance during the last 40 Years, 40th Anniversary, Institutional Investor magazine
2007 Profile, 20th Anniversary, Risk Magazine
2008 Distinguished Finance Educator Award, Financial Education Association
2008 First Annual Award for Foundational Contributions to Finance, Owen School of Management, Vanderbilt University
2009 Robert A. Muh Award in the Humanities, Arts, and Social Sciences, MIT
2009 Tjailing C. Koopmans Asset Award, Tilburg University
2009 Award of Excellence, The Hall of Excellence, Hastings-on-Hudson High School
2009 Sigma Xi, The Scientific Research Society, Life Member
2010 LECG Award for Outstanding Contributions to Financial Economics
2010 Kolmogorov Medal, University of London

Selected Lectures

1975 Distinguished Speaker Lecture, Western Finance Association
1985 Mortimer Hess Memorial Lecture, Association of the Bar of the City of New York
1988 12th Annual Lecture, Geneva Association, Paris
1992 Scholl Chair in Finance Distinguished Speaker Lecture, DePaul University
1993 Lecture, Discussion Meeting on Mathematical Finance, The Royal Society, London
1993 Keynote, 10th International Conference in Finance, Association Francaise de France
1994 AEA/AFA Speaker, Allied Social Sciences Meetings
1994 Speaker, International Monetary Conference, London
1995 Lecture, Newton Institute Seminar, Isaac Newton Institute for Mathematical Sciences, Cambridge
1995 Keynote, 12th International Conference in Finance, Association Francaise de France
1995 Keynote, 25th Anniversary, Financial Management Association
1996 Oxford University Press and Massachusetts Institute of Technology Sloan School of Management
Distinguished Lectures in Business, Massachusetts Institute of Technology, Cambridge
1996 Donor's Lecture, London Business School, London
1996 Inaugural, Dean's Research Seminar, Harvard Business School
1996 Faculty Inaugural Session, University of Lausanne
1996 Paolo Baffi Lecture on Money and Finance, Bank of Italy, Rome
1997 Edgar Lorch Memorial Lecture, Sigma Xi, Columbia University
1998 Lionel McKenzie Lecture, University of Rochester
1998 Martin H. Crego Lecture, Vassar College
1998 I.E. Block Community Lecture, Society for Industrial and Applied Mathematics
1999 Keynote, Risk Magazine's 5th Annual Derivatives and Risk Management Congress, Boston
2000 Speaker, Boston Economic Club
2000 Speaker, Finance 2000, Boston University
2000 Keynote, First World Congress of Bachelier Finance Society, Paris
2000 Keynote, IMF/World Bank Meetings, Prague
2000 Keynote, Kyoto Symposium, Tokyo
2001 First Nomura Lecture, Mathematical Institute, University of Oxford
2001 Keynote, European Finance Association, Barcelona
2001 First Nash Distinguished Lecture in Quantitative Finance, Carnegie-Mellon University, Pittsburgh
2001 Nobel Centennial, Economics Department, Lund University
2001 Nobel Centennial, Stockholm Institute for Financial Research
2001 Nobels in Venice 2001 - III MILLENNIUM COLLOQUIA
2002 Commencement Speaker, Master of Financial Engineering, Haas School of Business, University of California
2002 Keynote, De Nederlandsche Bank Conference, Amsterdam
2002 Fourth Geneva Conference on the World Economy, International Centre for Monetary and Banking Studies, Geneva
2002 Universita degli Studi di Brescia, Italy
2002 Bocconi University, Milan
2002 Third Millennium Colloquium, Venice
2002 Keynote, 8th Annual Risk Management Conference, ICBI, Geneva
2003 Keynote, Conference on International Accounting Standards, Harvard Law School
2003 Keynote, Annual Meeting Conference, Association of Investment Management and Research, Phoenix
2003 Keynote, 6th Hellenic European Conference on Computer Mathematics and Its Applications, Athens University of Economics and Business
2003 Keynote, 10th Anniversary Risk Management Conference, ICBI, Geneva
2004 Isaacs-Jonas Entrepreneurship Lecture, School of Engineering and Applied Science, Columbia University
2004 Universidad Nacional Mayor de San Marcos, Lima Peru
2004 XIV National Congress of Students of Economics, Peru
2004 Central Bank of Peru, Lima
2004 Nobels in Venice Conference, Venice
2004 Lindau Nobel Prize Winners' Conference, Lindau Germany
2004 Keynote, 14th Annual Derivative Securities and Risk Conference, Cornell University
2004 Keynote, Institute for Quantitative Research in Finance ('Q Group'), Paris
2004 Annual Meeting of Board of Governors, Inter-American Development Bank, Lima Peru
2004 Keynote, 11th Annual Risk Management Conference, ICBI, Geneva
2005 Political Economy Lecture Series, Department of Economics, Harvard University
2005 Keynote, Mathematical Finance Seminar, The Courant Institute of Mathematical Sciences, New York University
2005 Petra Conference of Nobel Laureates, Jordan
2005 Business Leadership Forum, Instituto de Empresa, Madrid
2005 Keynote, 12th Annual Risk Management Conference, ICBI, Geneva
2006 Nancy Schwartz Memorial Lecture, Northwestern University
2006 Keynote, 40th Anniversary Conference Q Group
2006 Keynote, 13th Annual Risk Management Conference, ICBI, Geneva
2007 Keynote, 14th Annual Risk Management Conference, ICBI, Geneva
2007 60th CFA Institute Anniversary Conference, New York
2007 Daimler Series Lecture, Guanghua School of Management, Peking University, Beijing
2007 Lecture, "Observations on Sovereign Wealth and QDII Management: Commercial Opportunities," Asset Managers Association, Shanghai
2008 Keynote, Silver Industry Conference, Singapore
2008 Seminar, National University of Singapore, Singapore
2008 London Business School Distinguished Speaker Lecture
2008 Seminar, CIEBA Meeting Washington, DC
2008 Keynote, Harvard University Law School Islamic Finance Forum
2008 Keynote, HBS Centennial Event, Mexico
2008 Keynote, Boston College Finance Conference, Boston
2008 Marjolin Lecture 27th SUERF Colloquium, Munich
2008 Opening Speech, Aix-en-Provence Economic Forum, Marseille
2008 Keynote, Stochastic Economic Dynamics and Finance Symposium, Denmark
2008 Central Bank of Denmark
2008 Boston University, "The Future of Life-Cycle Saving and Investing Conference"
2008 The Hague
2008 Owen Graduate School of Management, Vanderbilt University, Conference on Financial Innovation 
2008 Keynote, 15th Annual Risk Management Conference, ICBI, Geneva
2008 Keynote, Speech, Global Financial Linkages, Transmission of Shocks, and Asset Prices Conference, European Central Bank, Frankfurt
2008 Finance Lecture, Goethe University, Frankfurt
2009 Harvard Institute for Learning in Retirement
2009 Harvard Business School Global Economic Crisis "Deep Dive" Seminar
2009 IMF Asset Managers Roundtable, Washington, DC
2009 Columbia School of Engineering and Physical Science Research Panel
2009 Keynote, Institutional Money Congress Frankfurt
2009 Robert A. Muh Lecture, MIT
2009 Keynote, Conference - Facing the Crisis: Economic and Social Policies for Turbulent Times, 50th Anniversary of the Inter-American Development Bank, Medellin, Colombia
2009 Van Lanschot Lecture, Tilburg University, Holland
2009 Keynote, European Financial Management Association, Milan
2009 Keynote, World Glaucoma Congress, Boston
2009 Keynote, Money and Banking Conference, Central Bank of Argentina
2009 CME Global Financial Leadership Conference, Chicago Mercantile Exchange
2010 Kolmogorov Lecture, University of London
2010 Nathan and Beatrice Keyfitz Lecture, Fields Institute, Toronto
2010 9th Carroll Round Lecture, Georgetown University
2010 Cambridge Science Festival 2010: "Lunch with a Laureate" Series, MIT
2010 Keynote, 2010 FIAP International Seminar: Developing the Potential of the Individually Funded Pension Systems, Chile

Advisory and Editorial Boards

Current:

Advisory Editor, Review of Development Finance (2009- )
Member, Academic Advisory Board, Journal of Applied Corporate Finance (2008- )
Co-editor, Annual Review of Financial Economics, (2007- )
Advisory Board, Journal of Financial Literature (2004- )
Advisory Board, Annals of Finance (2004- )
Advisory Board, Journal of Investment Management (2002- )
Advisory Board, North Holland Series of Handbooks in Finance (2000- )
Advisory Board, International Journal of Theoretical & Applied Finance (1997- )
Advisory Board, Brookings-Wharton (1997- )
Advisory Board, Journal of Financial Education (1995- )
International Board of Scientific Advisers, Tinbergen Institute (1995- )
Advisory Board, Review of Derivatives Research (1993- )
Advisory Board, Japan Financial Economics Association (1993- )
Associate Editor, Journal of Fixed Income (1991- )
Advisory Board, Mathematical Finance (1989- )
Editorial Board, Finance India (1988- ) 

Past:

Advisory Council, Financial Analysts Journal (2003-2009)
Advisory Board, Journal of Banking and Finance (2003-2007)
Advisory Board, Review of Finance (formerly European Finance Review (1996-2005)
Associate Editor, Journal of Banking and Finance (1977-1979,1992-2003)
Advisory Board, Center for Global Management and Research, George Washington University (1996-2000)
Advisory Board, The New Palgrave Dictionary of Money and Finance (1989-1992)
Selection Editor, Papers and Proceedings, Journal of Finance, July 1986
Co-Editor, Journal of Financial Economics (1974-1977)
Associate Editor, Geneva Papers on Risk and Insurance (1989-1996)
Associate Editor, Journal of Financial Economics (1977-1983)
Associate Editor, Journal of Money, Credit and Banking (1974-1979)
Associate Editor, Journal of Finance (1973-1977)
Associate Editor, International Economic Review (1972-1977)
Founding Committee, Review of Financial Studies (1986)

Interviews

Columbia University School of Engineering Award
Profile: Robert C. Merton in Quantitative Finance, Vol 2 Issue 2 http://quant.iop.org
"Too Young to Retire," interview by Rutger Vahl, DNB Magazine, a publication of the Dutch Central Bank, no 3/4 2002
"A Model Mind," CFA Magazine , July-August 2004, interview with Roger Mitchell
"'Hedge funds' are a safety valve" interview Madrid, Spain, October 2005
"Harvard's Financial Scientist," by Peter Carr, Bloomberg Markets, October 2006
"CFOs : Don't forget pension funds," interview by Joel Chernoff, Pensions and Investments, December 11, 2006
"Derivatives provide security," interview by Kris van Hammet, Het Financiale Dagblad, Spring 2007
"Power & Influence," interview by Michael Peltz, Institutional Investor, p. 91, May 1, 2007
A model prophet," interview by Navroz Patel, Risk, V. 20 N. 6 July 2007, p. 40
"Don argues against annuity with refund," interview by Jeremy Au Yong, The Straits Times, January 11, 2008, Singapore.
"On Markets and Complexity," interview by Nate Nickerson, Technology Review, April 2/2008
"We have all learned," Interview, Institutional Money, 8/3/2007.
Bloomberg Television, Interview: Financial Risk, Now versus the Past, November 2007, Bloomberg Television, Singapore
Nobel Prize: Nobel Thinkers: Robert C. Merton
Nobel Prize: Nobel Thinkers: Paul A. Samuelson
Scully The World Show 2008, Nobel Laureates, Interview
"Under the Hood: Retirement Engine Rebuilt," Right Now, Harvard Magazine, January-February 2009, 9-10
"Lehman failliet laten gaan was fout," interview by Marike Stelligna, Elsevier, The Netherlands
"Whodunit?," interview by Dan Tudball, Wilmott Magazine, England, May 2009, pp. 32-45

Video: Speeches and Seminars

1997 Nobel Prize
1997 Nobel Prize Press Conference Harvard Business School
Haas School of Business video of Commencement Speech by Robert C. Merton
2001 Business, Government and the International Economy, Robert C. Merton and Paul Samuelson, November 19 
2001 First Nomura Lecture, Mathematical Institute, University of Oxford
2001 Keynote, European Finance Association, Barcelona
2001 First Nash Distinguished Lecture in Quantitative Finance, Carnegie-Mellon University, Pittsburgh
2002 Baker Library FEA
2003 NewsHour with Jim Lehrer, July 20, 2003, with Robert C. Merton on Stock Options
2003  Robert C. Merton Keynote Speech at 2003 AIMR Annual Conference
2004 Financial Engineering Graduation Speech, UC Berkeley
2006 Celebrating the Robert C. Merton Professorship, MIT Sloan School of Management, March 28
2006 "How to Pursue Both Comparative Advantage and  Efficient Diversification Risk: An Application of Derivative Securities", Nancy Schwartz Memorial Lecture, Northwestern University, April 5, 2006  View Video.
2006 "Future of Personal Finance", Boston University-Boston Federal Reserve Conference, October 26
2007 CFA Institute Annual Conference, May 2
2008 Keynote, Silver Industry Conference, Singapore
2008 Seminar, National University of Singapore, Singapore
2008 Chicago Board Options Exchange (CBOE) Panel Discussion reported in Barron's by Steven M. Sears, May 12, P. 52  
2008 Harvard Business School Panel, "Turmoil on the Street: Fathoming the Financial Crisis," September 23
2008 Harvard University Panel, "Understanding the Crisis in the Markets: A Panel of Harvard Experts," September 25
2008 Boston University, "The Future of Life-Cycle Saving & Investing Conference," October 23 
2008 Owen Graduate School of Management, Vanderbilt University, Conference on Financial Innovation: 35 Years of Black/Scholes and Merton, October 16
2009 Columbia School of Engineering and Physical Science Research Panel
2009 Robert A. Muh Award in the Humanities, Arts, and Social Sciences, MIT
2009 Harvard Business School Spring Reunion, "Observations on the Financial Crisis"
2009 Keynote, European Financial Management Association, Milan

Books

  1. Annual Review of Financial Economics

    Keywords: Finance; Economics;

    Citation:

    Lo, Andrew W., and Robert C. Merton, eds. Annual Review of Financial Economics. Palo Alto: Annual Reviews, 2009. View Details
  2. Financial Economics

    This book seeks to explain finance through its functions rather than its institutions, concentrating on the three pillars of finance: optimization over time, asset valuation, and risk management.

    Keywords: Economics; Finance; Assets; Risk Management; Risk and Uncertainty; Valuation;

    Citation:

    Bodie, Zvi, Robert C. Merton, and David L. Cleeton. Financial Economics. 2nd ed. NJ: Prentice Hall, 2009. (Overview; Translated into Korean and Hungarian.) View Details
  3. The Derivatives Sourcebook

    Keywords: Books;

    Citation:

    Lim, Terence, Andrew W. Lo, Robert C. Merton, and Myron S. Scholes. The Derivatives Sourcebook. Foundation and Trends in Finance . Now Publishers, 2006. View Details
  4. Transparency, Risk Management and International Financial Fragility

    Keywords: Risk Management; Finance;

    Citation:

    Draghi, Mario, Francesco Giavazzi, and Robert C. Merton. Transparency, Risk Management and International Financial Fragility. Vol. 4, Geneva Reports on the World Economy. International Center for Monetary and Banking Studies, 2003. View Details
  5. Finance

    Keywords: Finance;

    Citation:

    Bodie, Zvi, and Robert C. Merton. Finance. NJ: Prentice Hall, 2000. (Translations in modern and traditional Chinese, Japanese, Spanish, Portuguese, French, Russian, Korean, and Polish.) View Details
  6. Teacher's Manual for Cases in Financial Engineering: Applied Studies of Financial Innovation

    Keywords: Finance; Innovation and Invention; Cases;

    Citation:

    Mason, Scott P., Robert C. Merton, André Perold, and Peter Tufano. Teacher's Manual for Cases in Financial Engineering: Applied Studies of Financial Innovation. Prentice Hall, 1996. View Details
  7. The Global Financial System: A Functional Perspective

    Keywords: corporate finance; Imperfect markets; behavioral finance; Asset Pricing;

    Citation:

    Crane, D. B., K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri, and P. Tufano. The Global Financial System: A Functional Perspective. Boston: Harvard Business School Press, 1995. View Details
  8. Cases in Financial Engineering: Applied Studies of Financial Innovation

    Keywords: Finance; Innovation and Invention; Cases;

    Citation:

    Mason, Scott P., Robert C. Merton, André Perold, and Peter Tufano. Cases in Financial Engineering: Applied Studies of Financial Innovation. Englewood Cliffs: Prentice Hall, 1995. View Details
  9. Continuous-Time Finance

    Keywords: Finance; Financing and Loans;

    Citation:

    Merton, Robert C. Continuous-Time Finance. Oxford, U.K.: Basil Blackwell, 1990. (Rev. ed., 1992.) View Details
  10. The Collected Scientific Papers of Paul A. Samuelson

    Keywords: History; Science;

    Citation:

    Merton, Robert C., ed. The Collected Scientific Papers of Paul A. Samuelson. Vol. 3. Cambridge, MA: MIT Press, 1972. View Details

Journal Articles

  1. The Crisis in Retirement Planning

    Corporate America began to really take notice of the looming retirement crisis in the wake of the dot-com crash, when companies in major industries went bankrupt in large part because of their inability to meet their pension obligations. The result was an acceleration of America's shift away from employer-sponsored pension plans toward defined-contribution (DC) plans—epitomized by the ubiquitous 401(k)—which transfer the investment risk from the company to the employee. With that transfer has come a dangerous shift in investment focus, argues Nobel Laureate Robert C. Merton. Traditional pension plans were conceived and managed to provide members with a guaranteed income. And because that objective filtered right through the scheme, members thought of their benefits in those terms. Ask a member what her pension is worth and she'll reply with an income figure: "two-thirds of my final salary," for example. Most DC schemes, however, are designed and managed as investment accounts with the goal of accumulating the largest possible pot of savings. Communication with savers is framed entirely in terms of assets and returns. Ask a saver what his 401(k) is worth and you'll hear a cash amount and perhaps a lament to the value lost in the financial crisis. The trouble is that investment value and asset volatility are simply the wrong measures if your goal is to secure a particular future income. In this article, Merton explains a liability-driven investment strategy whose aim is to improve the probability of achieving a desired retirement income rather than to maximize the capital value of the savings.

    Citation:

    Merton, Robert C. "The Crisis in Retirement Planning." Harvard Business Review 92, nos. 7/8 (July–August 2014): 43–50. View Details
  2. Tribute to Paul A. Samuelson

    Citation:

    Merton, Robert C. "Tribute to Paul A. Samuelson." Journal of Portfolio Management 36, no. 2 (winter 2010): 1. View Details
  3. Transparantie in pensioensector nog ver te zoeken (Adjusted Actuarial Cost Price Conflicts with Transparency Requirement)

    Keywords: Cost; Price; Conflict and Resolution;

    Citation:

    Merton, Robert C., and Jan Snippe. "Transparantie in pensioensector nog ver te zoeken (Adjusted Actuarial Cost Price Conflicts with Transparency Requirement)." Financieele Dagblad (March 4, 2010). (Read Translation.) View Details
  4. Solutions for the Future

    Citation:

    Merton, Robert C. "Solutions for the Future." Pensions Insight (January 2010). View Details
  5. MIT Roundtable on Corporate Risk Management

    Against the backdrop of financial crisis, a distinguished group of academics and practitioners discusses the contribution of financial management and innovation to corporate growth and value, along with the pitfalls and unintended consequences of such innovation. The main focus of most panelists is the importance of a capital structure and risk management approach that complement the strategy and operations of the business. Instructive examples are provided by Judy Lewent, former CFO and head of strategic planning at Merck, and Lakshmi Shyam-Sunder, director of finance and risk management at the International Finance Corporation.

    But if these represent successful applications of finance theory, what about the large number of cases where the use of derivatives and other innovations has led to high leverage and apparent risk management failures? Part of the current trouble, as pointed out by Andrew Lo, can be attributed to the failure of risk managers and their models to account for highly improbable events—the so-called fat tails of the distribution. But, as Robert Merton suggests in closing, there is a more comprehensive explanation for today's problems: the tendency of market participants to respond to potentially risk-reducing financial innovation by increasing their risk-taking in other areas. "What we have here," says Merton, are two partly offsetting effects of innovation—one that is reducing the risk of companies and their investors, and another that is encouraging greater risk-taking. From a social or regulatory standpoint, the goal is to find the right balance between these two effects or forces.

    Keywords: Financial Crisis; Market Participation; Finance; Innovation and Invention; Growth and Development Strategy; Value; Distribution; Capital Structure; Risk Management; Business Ventures; Business Model; Strategy;

    Citation:

    Merton, Robert C. "MIT Roundtable on Corporate Risk Management." Journal of Applied Corporate Finance 20, no. 4 (fall 2008): 20–38. View Details
  6. Applying Modern Risk Management to Equity and Credit Analysis

    Traditional conventions of accounting and actuarial science distort the valuation of capital risk in corporations with pension plans because under these conventions, pension assets and liabilities are not included in balance sheet calculations. The modern risk management tools of derivatives technologies can improve both corporate decision making and external analysis of corporations.

    Keywords: Risk Management; Valuation; Financial Reporting; Decision Making; Credit; Financial Statements; Capital; Equity; Compensation and Benefits;

    Citation:

    Merton, Robert C. "Applying Modern Risk Management to Equity and Credit Analysis." CFA Institute Conference Proceedings Quarterly 24 (December 2007): 14–22. View Details
  7. Contingent Claims Approach to Measuring and Managing Sovereign Credit Risk

    This paper proposes a new approach to measure, analyze, and manage sovereign risk based on the theory and practice of modern contingent claims analysis (CCA). The paper provides a new framework for adapting the CCA model to the sovereign balance sheet in a way that can help forecast credit spreads and evaluate the impact of market risks and risks transferred from other sectors. This new framework is useful for assessing vulnerability, policy analysis, sovereign credit risk analysis, and design of sovereign risk mitigation and control strategies. Applications for investors in three areas are discussed. First, CCA provides a new framework for valuing, investing, and trading sovereign securities, including sovereign capital structure arbitrage. Second, it provides a new framework for analysis and management of sovereign wealth funds being created by many emerging market and resource rich countries. Third, the framework provides quantitative measures of sovereign risk exposures which facilitates the design of new instruments and contracts to control or transfer sovereign risk.

    Keywords: Credit; Investment; Sovereign Finance; Risk Management; Emerging Markets; Market Transactions; Mathematical Methods; Valuation;

    Citation:

    Gray, Dale . F., Robert C. Merton, and Zvi Bodie. "Contingent Claims Approach to Measuring and Managing Sovereign Credit Risk." Special Issue on Credit Analysis Journal of Investment Management 5, no. 4 (Fourth Quarter 2007): 5–28. View Details
  8. Allocating Shareholder Capital to Pension Plans

    Keywords: Capital; Resource Allocation; Business and Shareholder Relations; Compensation and Benefits;

    Citation:

    Merton, Robert C. "Allocating Shareholder Capital to Pension Plans." Journal of Applied Corporate Finance 18, no. 1 (winter 2006): 15–24. View Details
  9. Paul Samuelson and Financial Economics

    Keywords: Finance; Economics;

    Citation:

    Merton, Robert C. "Paul Samuelson and Financial Economics." American Economist 50, no. 2 (fall 2006): 262–300. View Details
  10. Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?

    Keywords: Equity; Profit; Risk and Uncertainty; Compensation and Benefits;

    Citation:

    Jin, Li, Robert C. Merton, and Zvi Bodie. "Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?" Journal of Financial Economics 81, no. 1 (July 2006): 1–26. View Details
  11. Made to Measure Is the Best Fit for Future Pensions

    Keywords: Measurement and Metrics; Compensation and Benefits;

    Citation:

    Mendoza, Roberto G., and Robert C. Merton. "Made to Measure Is the Best Fit for Future Pensions." Op-Ed Financial Times (January 6, 2006). View Details
  12. Observations on Innovation in Pension Fund Management in the Impending Future

    Keywords: Innovation and Invention; Compensation and Benefits; Investment; Management;

    Citation:

    Merton, Robert C. "Observations on Innovation in Pension Fund Management in the Impending Future." PREA Quarterly (winter 2006): 61–67. View Details
  13. You Have More Capital than You Think

    Keywords: Capital;

    Citation:

    Merton, Robert C. "You Have More Capital than You Think." Harvard Business Review 83, no. 11 (November 2005): 84–94. (HBS Reprint #R0511E.) View Details
  14. A Proposal for Expensing Employee Compensatory Stock Options for Financial Reporting Purposes

    Keywords: Employees; Stock Options; Finance; Reports;

    Citation:

    Hancock, Peter, Roberto G. Mendoza, and Robert C. Merton. "A Proposal for Expensing Employee Compensatory Stock Options for Financial Reporting Purposes." Journal of Applied Corporate Finance 17, no. 3 (summer 2005): 95–101. View Details
  15. Swapping Your Country's Risks

    Keywords: Risk and Uncertainty;

    Citation:

    Merton, Robert C. "Swapping Your Country's Risks." Harvard Business Review 83, no. 2 (February 2005): 34–36. (HBS Reprint #RO502A.) View Details
  16. The Design of Financial Systems: Towards a Synthesis of Function and Structure

    Keywords: Design; Finance; System;

    Citation:

    Merton, Robert C., and Zvi Bodie. "The Design of Financial Systems: Towards a Synthesis of Function and Structure." Journal of Investment Management 3, no. 1 (First Quarter 2005): 1–23. (Was Harvard Business School Working Paper No. 02-074, 2002.) (Reprinted in Chinese in Journal of Comparative Studies, Issue 17, March 2005.) View Details
  17. The Real Problem with Pensions

    Keywords: Compensation and Benefits; Problems and Challenges;

    Citation:

    Merton, Robert C. "The Real Problem with Pensions." Harvard Business Review 82, no. 12 (December 2004): 21–22. (HBS Reprint #F0412H.) View Details
  18. A Simple Way to Value Stock Options

    Keywords: Valuation; Stock Options;

    Citation:

    Mendoza, Roberto G., Robert C. Merton, and Peter Hancock. "A Simple Way to Value Stock Options." Financial Times (April 2, 2004), 13. View Details
  19. Foreword: On Financial Innovation and Economic Growth

    Keywords: Information; Finance; Innovation and Invention; Economic Growth;

    Citation:

    Merton, Robert C. "Foreword: On Financial Innovation and Economic Growth." Harvard China Review (spring 2004): 2–3. View Details
  20. Footnote Reporting Distorts Impact of Stock Options

    Keywords: Financial Instruments; Reports; Stocks;

    Citation:

    Bodie, Zvi, Robert S. Kaplan, and Robert C. Merton. "Footnote Reporting Distorts Impact of Stock Options." Boston Globe (March 16, 2003). View Details
  21. For the Last Time: Stock Options Are an Expense

    Keywords: Stock Options; Finance;

    Citation:

    Bodie, Zvi, Robert S. Kaplan, and Robert C. Merton. "For the Last Time: Stock Options Are an Expense." Harvard Business Review 81, no. 3 (March 2003): 62–71. (HBS Reprint #R0303D.) View Details
  22. A Better Way to Motivate Staff

    Keywords: Motivation and Incentives; Employees;

    Citation:

    Mendoza, Roberto G., Peter Hancock, and Robert C. Merton. "A Better Way to Motivate Staff." Financial Times (August 8, 2003). (Comment.) View Details
  23. Thoughts on the Future: Theory and Practice in Investment Management

    Keywords: Theory; Practice; Investment; Management;

    Citation:

    Merton, Robert C. "Thoughts on the Future: Theory and Practice in Investment Management." Financial Analysts Journal 59, no. 1 (January/February 2003): 17–23. (Winner of Graham and Dodd Best Perspectives Award For excellence in financial writing. Reprinted in Harvard College Investment Magazine, spring 2005.) View Details
  24. Options Should be Reflected in the Bottom Line

    Keywords: Financial Instruments; Profit;

    Citation:

    Bodie, Zvi, Robert S. Kaplan, and Robert C. Merton. "Options Should be Reflected in the Bottom Line." Wall Street Journal (August 1, 2002). View Details
  25. International Pension Swaps

    Keywords: Compensation and Benefits;

    Citation:

    Bodie, Zvi, and Robert C. Merton. "International Pension Swaps." Journal of Pension Economics & Finance 1 (January 2002): 77–83. View Details
  26. Commentary: Finance Theory and Future Trends: The Shift to Integration

    Keywords: Theory; Finance; Trends; Change; Integration;

    Citation:

    Merton, Robert C. "Commentary: Finance Theory and Future Trends: The Shift to Integration." Risk (July 1999), 48–50. View Details
  27. Applications of Option-Pricing Theory: Twenty-Five Years Later

    Keywords: Theory; Finance;

    Citation:

    Merton, Robert C. "Applications of Option-Pricing Theory: Twenty-Five Years Later." American Economic Review 88, no. 3 (June 1998): 323–349. View Details
  28. A Model of Contract Guarantees for Credit-Sensitive, Opaque Financial Intermediaries

    Keywords: Contracts; Financial Institutions;

    Citation:

    Merton, Robert C. "A Model of Contract Guarantees for Credit-Sensitive, Opaque Financial Intermediaries." European Finance Review 1, no. 1 (January 1997): 1–13. View Details
  29. Fischer Black

    Citation:

    Merton, Robert C., and Myron Scholes. "Fischer Black." Journal of Finance 50 (December 1995): 1359–1370. View Details
  30. A Functional Perspective of Financial Intermediation

    Keywords: Finance;

    Citation:

    Merton, Robert C. "A Functional Perspective of Financial Intermediation." Financial Management 24 (summer 1995): 23–41. View Details
  31. Financial Innovation and the Management and Regulation of Financial Institutions

    Keywords: Finance; Innovation and Invention; Management; Governing Rules, Regulations, and Reforms; Financial Institutions;

    Citation:

    Merton, Robert C. "Financial Innovation and the Management and Regulation of Financial Institutions." Journal of Banking & Finance 19 (July 1995): 461–481. View Details
  32. Mark-to-Market Accounting for Banks and Thrifts: Lessons from the Danish Experience

    Keywords: Fair Value Accounting; Denmark;

    Citation:

    Bernard, Victor L., Robert C. Merton, and Krishna G. Palepu. "Mark-to-Market Accounting for Banks and Thrifts: Lessons from the Danish Experience." Journal of Accounting Research 33, no. 1 (spring 1995): 1–32. View Details
  33. Influence of Mathematical Models in Finance on Practice: Past, Present and Future

    Keywords: Mathematical Methods; Finance;

    Citation:

    Merton, Robert C. "Influence of Mathematical Models in Finance on Practice: Past, Present and Future." Series A. Philosophical Transactions of the Royal Society of London, Series A, Physical Sciences and Engineering 347 (June 1994): 451–463. (Reprinted in Financial Practice and Education, spring 1995.) View Details
  34. Theory of Risk Capital in Financial Firms

    Keywords: Theory; Risk and Uncertainty; Capital; Business Ventures; Financial Services Industry;

    Citation:

    Merton, Robert C., and André Perold. "Theory of Risk Capital in Financial Firms." Continental Bank Journal of Applied Corporate Finance 6, no. 3 (fall 1993): 16–32. View Details
  35. Financial Innovation and Economic Performance

    Keywords: Finance; Innovation and Invention; Economics; Performance;

    Citation:

    Merton, Robert C. "Financial Innovation and Economic Performance." Continental Bank Journal of Applied Corporate Finance 4, no. 4 (winter 1992): 12–22. View Details
  36. Pension Reform and Privatization in International Perspective: The Case of Israel

    Keywords: Compensation and Benefits; Perspective; Privatization; Israel;

    Citation:

    Bodie, Zvi, and Robert C. Merton. "Pension Reform and Privatization in International Perspective: The Case of Israel." Riv'on le-kalkalah [Economic Quarterly] 152 (August 1992). (Reprinted in English in The Foundations of Pension Finance, Volume II, Zvi Bodie and E. Philip Davis, eds., Edward Elger, 2000.) View Details
  37. Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model

    Keywords: Labor; Supply and Industry; Investment; Decision Choices and Conditions;

    Citation:

    Bodie, Zvi, Robert C. Merton, and William Samuelson. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model." Journal of Economic Dynamics & Control 16, nos. 3-4 (July–October 1992): 427–449. View Details
  38. On the Management of Financial Guarantees

    Keywords: Management; Finance;

    Citation:

    Merton, Robert C., and Z. Bodie. "On the Management of Financial Guarantees." Financial Management 21 (winter 1992): 87–109. View Details
  39. The Financial System and Economic Performance

    Keywords: Finance; System; Economics; Performance;

    Citation:

    Merton, Robert C. "The Financial System and Economic Performance." Journal of Financial Services Research 4 (December 1990): 263–300. View Details
  40. On the Application of the Continuous-Time Theory of Finance to Financial Intermediation and Insurance

    Keywords: Theory; Finance; Insurance;

    Citation:

    Merton, Robert C. "On the Application of the Continuous-Time Theory of Finance to Financial Intermediation and Insurance." Geneva Papers on Risk and Insurance 14, no. 52 (July 1989): 225–262. (Reproduced as Chapter 14 in Continuous-Time Finance.) View Details
  41. In Honor of Nobel Laureate, Franco Modigliani

    Citation:

    Merton, Robert C. "In Honor of Nobel Laureate, Franco Modigliani." Journal of Economic Perspectives 1 (fall 1987): 145–155. View Details
  42. A Simple Model of Capital Market Equilibrium with Incomplete Information

    Keywords: Capital Markets;

  43. Dividend Behavior for the Aggregate Stock Market

    Keywords: Behavior; Stocks; Markets;

    Citation:

    Marsh, Terry A., and Robert C. Merton. "Dividend Behavior for the Aggregate Stock Market." Journal of Business 60 (January 1987): 1–40. View Details
  44. Dividend Variability and Variance Bounds Tests for the Rationality of Stock Market Prices

    Keywords: Stocks; Markets; Price;

    Citation:

    Merton, Robert C., and Terry A. Marsh. "Dividend Variability and Variance Bounds Tests for the Rationality of Stock Market Prices." American Economic Review 76, no. 3 (June 1986): 483–498. View Details
  45. The Returns and Risk of Alternative Put Option Portfolio Investment Strategies

    Keywords: Risk and Uncertainty; Investment; Strategy;

    Citation:

    Merton, Robert C., Myron S. Scholes, and Matthew L. Gladstein. "The Returns and Risk of Alternative Put Option Portfolio Investment Strategies." Journal of Business 55 (January 1982): 183–242. View Details
  46. On Market Timing and Investment Performance Part II: Statistical Procedures for Evaluating Forecasting Skills

    Keywords: Investment; Performance; Mathematical Methods; Forecasting and Prediction;

    Citation:

    Merton, Robert C., and Roy D. Henriksson. "On Market Timing and Investment Performance Part II: Statistical Procedures for Evaluating Forecasting Skills." Journal of Business 54 (October 1981): 513–533. View Details
  47. On Market Timing and Investment Performance Part I: An Equilibrium Theory of Value for Market Forecasts

    Keywords: Investment; Performance; Theory; Value; Forecasting and Prediction; Markets;

    Citation:

    Merton, Robert C. "On Market Timing and Investment Performance Part I: An Equilibrium Theory of Value for Market Forecasts." Journal of Business 54, no. 3 (July 1981): 363–406. View Details
  48. On Estimating the Expected Return on the Market: An Exploratory Investigation

    Keywords: Markets;

    Citation:

    Merton, Robert C. "On Estimating the Expected Return on the Market: An Exploratory Investigation." Journal of Financial Economics 8 (December 1980): 1–39. View Details
  49. On the Cost of Deposit Insurance When There Are Surveillance Costs

    Keywords: Cost; Insurance; Banking Industry;

    Citation:

    Merton, Robert C. "On the Cost of Deposit Insurance When There Are Surveillance Costs." Journal of Business 51, no. 3 (July 1978): 439–452. (Chapter 20 in Continuous-Time Finance.) View Details
  50. The Returns and Risk of Alternative Call Option Portfolio Investment Strategies

    Keywords: Risk and Uncertainty; Investment; Strategy;

    Citation:

    Merton, Robert C., Myron S. Scholes, and Matthew L. Gladstein. "The Returns and Risk of Alternative Call Option Portfolio Investment Strategies." Journal of Business 51 (April 1978): 183–242. View Details
  51. On the Pricing of Contingent Claims and the Modigliani-Miller Theorem

    Keywords: Price; Mathematical Methods;

    Citation:

    Merton, Robert C. "On the Pricing of Contingent Claims and the Modigliani-Miller Theorem." Journal of Financial Economics 5 (November 1977): 241–249. (Chapter 13 in Continuous-Time Finance.) View Details
  52. An Analytic Derivation of the Cost of Deposit Insurance and Loan Guarantees : An Application of Modern Option Pricing Theory

    Keywords: Cost; Insurance; Financing and Loans; Price; Theory;

  53. The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns

    Keywords: Price; Stocks;

  54. Option Pricing When Underlying Stock Returns are Discontinuous

    Keywords: Price; Stocks; Assets;

    Citation:

    Merton, Robert C. "Option Pricing When Underlying Stock Returns are Discontinuous." Journal of Financial Economics 3 (January–February 1976): 125–144. (Chapter 9 in Continuous-Time Finance.) View Details
  55. Theory of Finance from the Perspective of Continuous Time

    Keywords: Theory; Finance;

    Citation:

    Merton, Robert C. "Theory of Finance from the Perspective of Continuous Time." Journal of Financial and Quantitative Analysis 10 (November 1975): 659–674. View Details
  56. An Asymptotic Theory of Growth Under Uncertainty

    Keywords: Theory; Growth and Development; Risk and Uncertainty;

    Citation:

    Merton, Robert C. "An Asymptotic Theory of Growth Under Uncertainty." Review of Economic Studies 42, no. 3 (July 1975): 375–393. (Chapter 17 in Continuous-Time Finance.) View Details
  57. Fallacy of the Log-Normal Approximation to Optimal Portfolio Decision Making over Many Periods

    Keywords: Investment; Decision Making;

    Citation:

    Merton, Robert C., and Paul A. Samuelson. "Fallacy of the Log-Normal Approximation to Optimal Portfolio Decision Making over Many Periods." Journal of Financial Economics 1 (May 1974): 67–94. View Details
  58. On the Pricing of Corporate Debt: The Risk Structure of Interest Rates

    Keywords: Price; Borrowing and Debt; Risk and Uncertainty; Interest Rates;

    Citation:

    Merton, Robert C. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates." Journal of Finance 29, no. 2 (May 1974): 449–470. (Chapter 12 in Continuous-Time Finance.) View Details
  59. Generalized Mean-Variance Tradeoffs for Best Perturbation Corrections to Approximate Portfolio Decisions

    Keywords: Investment; Finance;

    Citation:

    Samuelson, Paul A., and Robert C. Merton. "Generalized Mean-Variance Tradeoffs for Best Perturbation Corrections to Approximate Portfolio Decisions." Journal of Finance 29, no. 1 (March 1974): 27–40. View Details
  60. The Optimality of a Competitive Stock Market

    Keywords: Competition; Stocks; Markets;

    Citation:

    Merton, Robert C., and Marti G. Subrahmanyam. "The Optimality of a Competitive Stock Market." Bell Journal of Economics and Management Science 5, no. 1 (spring 1974): 145–170. View Details
  61. An Intertemporal Capital Asset Pricing Model

    Keywords: Capital; Assets;

    Citation:

    Merton, Robert C. "An Intertemporal Capital Asset Pricing Model." Econometrica 41, no. 5 (September 1973): 867–887. (Chapter 15 in Continuous-Time Finance.) View Details
  62. Book Review of Studies in the Theory of Capital Markets, edited by M.C. Jensen

    Keywords: Theory; Markets;

    Citation:

    Merton, Robert C. "Book Review of Studies in the Theory of Capital Markets, edited by M.C. Jensen." Journal of Money, Credit & Banking 5, no. 2 (May 1973): 729–730. View Details
  63. The Relationship between Put and Call Option Prices: Comment

    Keywords: Price; Stocks;

    Citation:

    Merton, Robert C. "The Relationship between Put and Call Option Prices: Comment." Journal of Finance 28, no. 1 (March 1973): 183–184. View Details
  64. Theory of Rational Option Pricing

    Keywords: Theory; Price;

    Citation:

    Merton, Robert C. "Theory of Rational Option Pricing." Bell Journal of Economics and Management Science 4, no. 1 (spring 1973): 141–183. (Chapter 8 in Continuous-Time Finance.) View Details
  65. 'Continuous-Time Speculative Processes': Appendix to Paul A. Samuelson's 'Mathematics of Speculative Price'

    Keywords: Price;

  66. An Analytical Derivation of the Efficient Portfolio Frontier

    Keywords: Investment;

    Citation:

    Merton, Robert C. "An Analytical Derivation of the Efficient Portfolio Frontier." Journal of Financial and Quantitative Analysis 10 (September 1972): 1851–1872. View Details
  67. Optimum Consumption and Portfolio Rules in a Continuous-Time Model

    Keywords: Governing Rules, Regulations, and Reforms;

    Citation:

    Merton, Robert C. "Optimum Consumption and Portfolio Rules in a Continuous-Time Model." Journal of Economic Theory 3 (December 1971): 373–413. (Chapter I of Ph.D. dissertation; Chapter 5 in Continuous-Time Finance.) View Details
  68. A Golden Golden-Rule for Welfare-Maximization in an Economy with a Varying Population Growth Rate

    Keywords: Welfare or Wellbeing; Economy; Growth and Development;

    Citation:

    Merton, Robert C. "A Golden Golden-Rule for Welfare-Maximization in an Economy with a Varying Population Growth Rate." Western Economic Journal 4 (December 1969): 307–318. (Chapter III of Ph.D. dissertation.) View Details
  69. Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case

    Keywords: Risk and Uncertainty; Investment;

    Citation:

    Merton, Robert C. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case." Review of Economics and Statistics 51 (August 1969): 247–257. (Chapter II of Ph.D. dissertation; Chapter 4 in Continuous-Time Finance.) View Details
  70. A Complete Model of Warrant Pricing that Maximizes Utility

    Keywords: Price;

    Citation:

    Samuelson, Paul A., and Robert C. Merton. "A Complete Model of Warrant Pricing that Maximizes Utility." Industrial Management Review 10 (winter 1969): 17–46. (Chapter IV of Ph.D. dissertation; Chapter 7 in Continuous-Time Finance.) View Details
  71. A 'Motionless' Motion of Swift's Flying Island

    Citation:

    Merton, Robert C. "A 'Motionless' Motion of Swift's Flying Island." Journal of the History of Ideas 27 (April–June 1966): 275–277. View Details

Book Chapters

  1. Measuring and Managing Macrofinancial Risk and Financial Stability: A New Framework

    This paper proposes a new approach to improve the way central banks can analyze and manage the financial risks of a national economy. It is based on the modern theory and practice of contingent claims analysis (CCA), which is successfully used today at the level of individual banks by managers, investors, and regulators. The basic analytical tool is the risk-adjusted balance sheet, which shows the sensitivity of the enterprise's assets and liabilities to external "shocks." At the national level, the sectors of an economy are viewed as interconnected portfolios of assets, liabilities, and guarantees-some explicit and others implicit. Traditional approaches have difficulty analyzing how risks can accumulate gradually and then suddenly erupt in a full-blown crisis. The CCA approach is well-suited to capturing such "non-linearities" and to quantifying the effects of asset-liability mismatches within and across institutions. Risk adjusted CCA balance sheets facilitate simulations and stress testing to evaluate the potential impact of policies to manage systemic risk.

    Keywords: Financial Statements; Economy; Financial Condition; Central Banking; Management Analysis, Tools, and Techniques; Management Practices and Processes; Risk Management; Measurement and Metrics; System Shocks;

    Citation:

    Gray, Dale F., Robert C. Merton, and Zvi Bodie. "Measuring and Managing Macrofinancial Risk and Financial Stability: A New Framework." In Financial Stability, Monetary Policy, and Central Banking. Vol. 15, edited by Alfaro A. Rodrigo and Cifuentes S. Rodrigo., 2010. View Details
  2. Preface

    Citation:

    Lo, Andrew W., and Robert C. Merton. "Preface." Preface to Chap. 1 Annual Review of Financial Economics, edited by Andrew W. Lo and Robert C. Merton, 1–17. Palo Alto: Annual Reviews, 2009. View Details
  3. Nobel Laureate Panel Discussion: What Retirement Means to Me

    Keywords: Retirement;

    Citation:

    Merton, Robert C., Paul A. Samuelson, and Robert M. Solow. "Nobel Laureate Panel Discussion: What Retirement Means to Me." Chap. 1 in The Future of Life-Cycle Saving and Investing: The Retirement Phase, edited by Zvi Bodie, Laurence B. Siegel, and Rodney N. Sullivan, 1–14. Charlottesville: CFA Institute, Research Foundation, 2009. (Monograph.) View Details
  4. Contribution

    Citation:

    Merton, Robert C. "Contribution." Contribution to Harry M. Markowitz, Merton H. Miller, William F. Sharpe, Robert C. Merton, and Myron S. Scholes. Vol. 2, edited by Howard R. Vane and Chris Mulhearn. Pioneering Papers of the Nobel Memorial Laureates in Economics. Edward Elgar Publishing, 2009. (Introduction to Part IV.) View Details
  5. Foreword

    Citation:

    Merton, Robert C. "Foreword." Les nouvelles frontières de l'Entreprise: Rencontres économiques d'Aix-en-Provence, 11–16. Cercle des économistes, 2008, French ed. (Full Text.) View Details
  6. Foreword

    Citation:

    Merton, Robert C. "Foreword." Financial Derivatives Pricing, by Robert A. Jarrow, xi–xii. World Scientific, 2008. (Full Text.) View Details
  7. Foreword

    Citation:

    Merton, Robert C. "Foreword." The World of Equity Derivatives, 10–11. London: Newsdesk Communications Ltd., 2008. (Full Text.) View Details
  8. A New Generation of Pension Fund Management

    In talking about pension plans at this point in American economic and corporate history, we need to discuss three linked issues: the defined-benefit (DB) corporate plans that worked for our parents; the defined-contribution (DC) plans we're getting today because corporations no longer want to bear the expense and risk of the DB plan; and how we can reshape the DC plan into something that feels more like a DB plan in the near future. Although this chapter focuses on a U.S. context and corporate pension plans, retirement and asset-management issues are a global challenge, and indeed, while the details vary across geopolitical borders, the fundamentals are shared by employers and employees across the globe. What's happening with the DB plan, why is it happening, and what are the implications for asset markets and asset management?

    Keywords: Asset Management; Investment Funds; Compensation and Benefits; Risk Management; Retirement; United States;

    Citation:

    Merton, Robert C. "A New Generation of Pension Fund Management." Chap. 1 in Innovations in Investment Management, edited by H. Gifford Fong, 1–17. JOIM Conference Series. New York: Bloomberg Press, 2008. View Details
  9. Foreword

    Citation:

    Merton, Robert C. "Foreword." Macrofinancial Risk Analysis, by Dale F. Gray and Samuel W. Malone. John Wiley & Sons, 2008. (Full Text.) View Details
  10. The Future of Retirement and Planning

    Keywords: Retirement; Planning;

    Citation:

    Merton, Robert C. "The Future of Retirement and Planning." In The Future of Life-Cycle Saving and Investing, edited by Zvi Bodie, Dennis McLeavey, and Laurence B. Siegel. CFA Institute, Research Foundation, 2007. View Details
  11. Paul Samuelson and Financial Economics

    Keywords: Economics; Finance;

    Citation:

    Merton, Robert C. "Paul Samuelson and Financial Economics." In Samuelsonian Economics and the Twenty-First Century, edited by Michael Szenberg, Lall Ramrattan, and Aron Gottesman. Oxford: Oxford University Press, 2006. View Details
  12. Future Possibilities in Finance Theory and Finance Practice

    Keywords: Finance; Mathematical Methods; Practice;

    Citation:

    Merton, Robert C. "Future Possibilities in Finance Theory and Finance Practice." In Mathematical Finance - Bachelier Congress 2000, edited by H. Geman, D. Madan, S. Pliska, and T. Vorst. Berlin: Springer-Verlag, 2002. (Was HBS Working Paper 01-030.) View Details
  13. Foreword

    Citation:

    Merton, Robert C. "Foreword." Risk Management, by D. E. Bell and A. Schleifer Jr. Cambridge, MA: Course Technology Inc. (CTI), 1995. View Details
  14. The Global Financial System Project

    Keywords: International Finance; Globalized Markets and Industries; Projects; Banking Industry; Financial Services Industry;

    Citation:

    Merton, Robert C., and Peter Tufano. "The Global Financial System Project." In The Intellectual Venture Capitalist: John H. McArthur and the Work of the Harvard Business School, 1980-1995, edited by T. K. McCraw and J. L. Cruikshank. Boston: Harvard Business School Press, 1999. View Details
  15. Applications of Option-Pricing Theory: Twenty-Five Years Later

    Keywords: Asset Pricing; Stock Options; Mathematical Methods;

    Citation:

    Merton, Robert C. "Applications of Option-Pricing Theory: Twenty-Five Years Later." In Les Prix Nobel 1997, edited by Tore Frängsmyr. Stockholm: Nobel Foundation, 1997. (Reprinted in American Economic Review, June 1998.) View Details
  16. Foreword

    Citation:

    Merton, Robert C. "Foreword." Mathematics of Derivative Securities, edited by M. A.H. Dempster and S. Pliska. Cambridge University Press, 1997. View Details
  17. On the Role of the Wiener Process in Finance Theory and Practice: The Case of Replicating Portfolios

    Keywords: Mathematical Methods;

    Citation:

    Merton, Robert C. "On the Role of the Wiener Process in Finance Theory and Practice: The Case of Replicating Portfolios." In The Legacy of Norbert Wiener: A Centennial Symposium. Vol. 60, edited by D. Jerison, I. M. Singer, and D. W. Stroock. Proceedings of Symposia in Pure Mathematics . Providence, RI: American Mathematical Society, 1997. View Details
  18. Foreword

    Citation:

    Merton, Robert C. "Foreword." Managing Derivative Risks, edited by L. Chew. Chichester: John Wiley & Sons, 1996. View Details
  19. A Conceptual Framework for Analyzing the Financial Environment

    Keywords: Finance; Framework;

    Citation:

    Merton, Robert C., and Zvi Bodie. "A Conceptual Framework for Analyzing the Financial Environment." Chap. 1 in The Global Financial System: A Functional Perspective, by D. B. Crane, K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri, and P. Tufano, 3–31. Boston: Harvard Business School Press, 1995. View Details
  20. The Informational Role of Asset Prices: The Case of Implied Volatility

    Keywords: Asset Pricing; Price; Volatility; Information;

    Citation:

    Bodie, Zvi, and Robert C. Merton. "The Informational Role of Asset Prices: The Case of Implied Volatility." Chap. 6 in The Global Financial System: A Functional Perspective, by D. B. Crane, K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri, and P. Tufano, 197–224. Boston: Harvard Business School Press, 1995. View Details
  21. Financial Infrastructure and Public Policy: A Functional Perspective

    Keywords: Financial Markets; Financial Institutions; Policy; Government and Politics; Business and Government Relations; Banking Industry; Financial Services Industry;

    Citation:

    Merton, Robert C., and Zvi Bodie. "Financial Infrastructure and Public Policy: A Functional Perspective." Chap. 8 in The Global Financial System: A Functional Perspective, by D. B. Crane, K. A. Froot, Scott P. Mason, André Perold, R. C. Merton, Z. Bodie, E. R. Sirri, and P. Tufano, 263–282. Boston: Harvard Business School Press, 1995. View Details
  22. Deposit Insurance Reform: A Functional Approach

    Keywords: Banks and Banking; Insurance; Governing Rules, Regulations, and Reforms; Government and Politics; Insurance Industry; Banking Industry;

    Citation:

    Merton, Robert C., and Zvi Bodie. "Deposit Insurance Reform: A Functional Approach." In Carnegie-Rochester Conference Series on Public Policy. Vol. 38, edited by A. Meltzer and C. Plosser. Amsterdam: Elsevier, 1993. View Details
  23. Management of Risk Capital in Financial Firms

    Keywords: Risk Management; Capital; Financial Institutions; Financial Services Industry;

    Citation:

    Merton, Robert C., and André Perold. "Management of Risk Capital in Financial Firms." In Financial Services: Perspectives and Challenges, edited by Samuel L. Hayes III, 215–245. Boston, MA: Harvard Business School Press, 1993. View Details
  24. Operation and Regulation in Financial Intermediation: A Functional Perspective

    Keywords: Financial Markets; Operations; Governing Rules, Regulations, and Reforms; Government and Politics; Financial Services Industry;

    Citation:

    Merton, Robert C. "Operation and Regulation in Financial Intermediation: A Functional Perspective." In Operation and Regulation of Financial Markets, edited by P. Englund. Stockholm: Ekonomiska rådet (Sweden), 1993. View Details
  25. Optimal Investment Strategies for University Endowment Funds

    Keywords: Investment Funds; Financial Strategy; Higher Education; Non-Governmental Organizations; Education Industry; Financial Services Industry;

    Citation:

    Merton, Robert C. "Optimal Investment Strategies for University Endowment Funds." In Studies of Supply and Demand in Higher Education, edited by C. Clotfelter and M. Rothschild. Chicago: University of Chicago Press, 1993. (Chapter 21 in Continuous-Time Finance.) View Details
  26. Pension Benefit Guarantees in the United States: A Functional Analysis

    Keywords: Compensation and Benefits; Government and Politics; United States;

    Citation:

    Bodie, Zvi, and Robert C. Merton. "Pension Benefit Guarantees in the United States: A Functional Analysis." In The Future of Pensions in the United States, edited by R. Schmitt. Philadelphia: University of Pennsylvania Press, 1993. (Reprinted in The Foundations of Pension Finance, Volume I, Zvi Bodie and E. Philip Davis, eds., Edward Elger, 2000.) View Details
  27. The Changing Nature of Debt and Equity: A Discussion

    Keywords: Borrowing and Debt; Equity; Change;

    Citation:

    Merton, Robert C. "The Changing Nature of Debt and Equity: A Discussion." In Are the Distinctions between Debt and Equity Disappearing? edited by R. W. Kopeke and E. S. Rosengren. Federal Reserve Bank of Boston Conference Series. Federal Reserve Bank of Boston, 1990. View Details
  28. Capital Market Theory and the Pricing of Financial Securities

    Keywords: Capital Markets; Financial Instruments; Asset Pricing; Mathematical Methods;

    Citation:

    Merton, Robert C. "Capital Market Theory and the Pricing of Financial Securities." In Handbook of Monetary Economics, edited by B. Friedman and F. Hahn. Amsterdam: North-Holland Publishing Company, 1990. View Details
  29. Defined Benefit versus Defined Contribution Pension Plans: What are the Real Tradeoffs

    Keywords: Compensation and Benefits; Cost vs Benefits;

    Citation:

    Bodie, Zvi, Alan J. Marcus, and Robert C. Merton. "Defined Benefit versus Defined Contribution Pension Plans: What are the Real Tradeoffs." In Pensions in the U.S. Economy, edited by John B. Shoven and David A. Wise. Chicago: University of Chicago Press, 1988. View Details
  30. Continuous-Time Stochastic Models

    Keywords: Mathematical Methods;

    Citation:

    Merton, Robert C. "Continuous-Time Stochastic Models." In The New Palgrave: A Dictionary of Economic Theory and Doctrine, edited by John Eatwell, Murray Milgate, and Peter Newman. London: Macmillan Press, 1987. (Revised in The New Palgrave Dictionary of Money and Finance, London: MacMillan Press, Ltd., 1992.) View Details
  31. Pension Plan Integration as Insurance against Social Security Risk

    Keywords: Compensation and Benefits; Integration;

    Citation:

    Merton, Robert C., Zvi Bodie, and Alan J. Marcus. "Pension Plan Integration as Insurance against Social Security Risk." In Issues in Pension Economics, edited by Zvi Bodie, John B. Shoven, and David A. Wise. Chicago: University of Chicago Press, 1987. View Details
  32. On the Current State of the Stock Market Rationality Hypothesis

    Keywords: Financial Markets; Stocks; Mathematical Methods;

    Citation:

    Merton, Robert C. "On the Current State of the Stock Market Rationality Hypothesis." In Macroeconomics and Finance: Essays in Honor of Franco Modigliani, edited by R. Dornbusch, S. Fischer, and J. Bossons. Cambridge: MIT Press, 1987. View Details
  33. Implicit Labor Contracts Viewed as Options: A Discussion of 'Insurance Aspects of Pensions'

    Keywords: Compensation and Benefits; Decision Choices and Conditions; Contracts; Labor and Management Relations; Insurance;

    Citation:

    Merton, Robert C. "Implicit Labor Contracts Viewed as Options: A Discussion of 'Insurance Aspects of Pensions'." In Pensions, Labor, and Individual Choice, edited by D. A. Wise. Chicago: University of Chicago Press, 1985. View Details
  34. The Role of Contingent Claims Analysis in Corporate Finance

    Keywords: Mathematical Methods; Corporate Finance;

    Citation:

    Mason, Scott P., and Robert C. Merton. "The Role of Contingent Claims Analysis in Corporate Finance." In Recent Advances in Corporate Finance, edited by E. I. Altman and M. G. Subrahmanyam. Homewood, IL: Richard D. Irwin, 1985. View Details
  35. Macroeconomics and Finance: The Role of the Stock Market

    Keywords: Macroeconomics; Financial Markets;

    Citation:

    Fischer, Stanley, and Robert C. Merton. "Macroeconomics and Finance: The Role of the Stock Market." In Essays on Macroeconomic Implications of Financial and Labor Markets and Political Processes. Vol. 21, edited by K. Brunner and A. H. Meltzer. Amsterdam: North-Holland Publishing Company, 1984. View Details
  36. On Consumption-Indexed Public Pension Plans

    Keywords: Compensation and Benefits; Public Sector;

    Citation:

    Merton, Robert C. "On Consumption-Indexed Public Pension Plans." In Financial Aspects of the U.S. Pension System, edited by Zvi Bodie and John B. Shoven. Chicago: University of Chicago Press, 1983. (Chapter 18 in Continuous-Time Finance. Reprinted in The Foundations of Pension Finance, Volume I, Zvi Bodie and E. Philip Davis, eds., Edward Elger, 2000.) View Details
  37. On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital is Not Tradeable

    Keywords: Risk Management; Human Capital; Compensation and Benefits;

    Citation:

    Merton, Robert C. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital is Not Tradeable." In Financial Aspects of the U.S. Pension System, edited by Zvi Bodie and John B. Shoven. Chicago: University of Chicago Press, 1983. (Reprinted in The Foundations of Pension Finance, Volume I, Zvi Bodie and E. Philip Davis, eds., Edward Elger, 2000.) View Details
  38. Financial Economics

    Keywords: Finance; Economics;

    Citation:

    Merton, Robert C. "Financial Economics." In Paul Samuelson and Modern Economic Theory, edited by E. C. Brown and R. M. Solow. New York: McGraw-Hill, 1983. View Details
  39. On the Mathematics and Economic Assumptions of Continuous-Time Financial Models

    Keywords: Mathematical Methods; Economics; Finance;

    Citation:

    Merton, Robert C. "On the Mathematics and Economic Assumptions of Continuous-Time Financial Models." In Financial Economics: Essays in Honor of Paul Cootner, edited by W. F. Sharpe and C. M. Cootner. Englewood Cliffs, NJ: Prentice Hall, 1982. (Chapter 3 in Continuous-Time Finance.) View Details
  40. On the Microeconomic Theory of Investment under Uncertainty

    Keywords: Microeconomics; Investment; Risk and Uncertainty; Risk Management;

    Citation:

    Merton, Robert C. "On the Microeconomic Theory of Investment under Uncertainty." In Handbook of Mathematical Economics. Vol. 2, edited by K. Arrow and M. Intriligator. Amsterdam: North-Holland Publishing Company, 1982. View Details
  41. Capital Requirements in the Regulation of Financial Intermediaries: A Discussion

    Keywords: Capital; Financial Markets; Financial Institutions; Governing Rules, Regulations, and Reforms; Policy; Business and Government Relations; Financial Services Industry;

    Citation:

    Merton, Robert C. "Capital Requirements in the Regulation of Financial Intermediaries: A Discussion." In Proceedings: The Regulation of Financial Institutions.Federal Reserve Bank of Boston Conference Series. Federal Reserve Bank of Boston, 1979. View Details
  42. A Reexamination of the Capital Asset Pricing Model

    Keywords: Capital; Asset Pricing; Mathematical Methods;

    Citation:

    Merton, Robert C. "A Reexamination of the Capital Asset Pricing Model." In Studies in Risk and Return, edited by J. Bicksler and I. Friend. Cambridge, MA: Ballinger Publishing Company, 1977. View Details

Working Papers

  1. Systemic Risk and the Refinancing Ratchet Effect

    The confluence of three trends in the U.S. residential housing market-rising home prices, declining interest rates, and near-frictionless refinancing opportunities-led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur simultaneously, as they did over the past decade, they impose an unintentional synchronization of homeowner leverage. This synchronization, coupled with the indivisibility of residential real estate that prevents homeowners from deleveraging when property values decline and homeowner equity deteriorates, conspire to create a "ratchet" effect in which homeowner leverage is maintained during good times without the ability to decrease leverage during bad times. If refinancing-facilitated homeowner-equity extraction is sufficiently widespread-as it was during the years leading up to the peak of the U.S. residential real-estate market-the inadvertent coordination of leverage during a market rise implies higher correlation of defaults during a market drop. To measure the systemic impact of this ratchet effect, we simulate the U.S. housing market with and without equity extractions, and estimate the losses absorbed by mortgage lenders by valuing the embedded put-option in non-recourse mortgages. Our simulations generate loss estimates of $1.5 trillion from June 2006 to December 2008 under historical market conditions, compared to simulated losses of $280 billion in the absence of equity extractions.

    Keywords: Equity; Mortgages; Interest Rates; Price; Housing; Risk and Uncertainty; United States;

    Citation:

    Khandani, Amir E., Andrew W. Lo, and Robert C. Merton. "Systemic Risk and the Refinancing Ratchet Effect." Harvard Business School Working Paper, No. 10-023, September 2009. (Revised July 2010.) View Details
  2. New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability

    This paper proposes a new approach to improve the way central banks can analyze and manage the financial risks of a national economy. It is based on the modern theory and practice of contingent claims analysis (CCA), which is successfully used today at the level of individual banks by managers, investors, and regulators. The basic analytical tool is the risk-adjusted balance sheet, which shows the sensitivity of the enterprise's assets and liabilities to external "shocks." At the national level, the sectors of an economy are viewed as interconnected portfolios of assets, liabilities, and guarantees—some explicit and others implicit. Traditional approaches have difficulty analyzing how risks can accumulate gradually and then suddenly erupt in a full-blown crisis. The CCA approach is well-suited to capturing such "non-linearities" and to quantifying the effects of asset-liability mismatches within and across institutions. Risk-adjusted CCA balance sheets facilitate simulations and stress testing to evaluate the potential impact of policies to manage systemic risk.

    Keywords: Financial Crisis; Macroeconomics; Central Banking; Risk Management;

    Citation:

    Gray, Dale F., Robert C. Merton, and Zvi Bodie. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability." Harvard Business School Working Paper, No. 09-015, August 2008. (Revised.) View Details
  3. New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability

    This paper proposes a new approach to improve the way central banks can analyze and manage the financial risks of a national economy. It is based on the modern theory and practice of contingent claims analysis (CCA), which is successfully used today at the level of individual banks by managers, investors, and regulators. The basic analytical tool is the risk-adjusted balance sheet, which shows the sensitivity of the enterprise's assets and liabilities to external "shocks." At the national level, the sectors of an economy are viewed as interconnected portfolios of assets, liabilities, and guarantees—some explicit and others implicit. Traditional approaches have difficulty analyzing how risks can accumulate gradually and then suddenly erupt in a full-blown crisis. The CCA approach is well-suited to capturing such "non-linearities" and to quantifying the effects of asset-liability mismatches within and across institutions. Risk-adjusted CCA balance sheets facilitate simulations and stress testing to evaluate the potential impact of policies to manage systemic risk.

    Keywords: Financial Crisis; Macroeconomics; Central Banking; Risk Management;

    Citation:

    Gray, Dale F., Robert C. Merton, and Zvi Bodie. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability." NBER Working Paper Series, No. 13607, November 2007. View Details
  4. A New Framework for Analyzing and Managing Macrofinancial Risks of An Economy

    Citation:

    Gray, Dale F., Robert C. Merton, and Zvi Bodie. "A New Framework for Analyzing and Managing Macrofinancial Risks of An Economy." Harvard Business School Working Paper, No. 07-026, October 2006. (Also NBER Working Paper Series, No. 12637.) View Details
  5. Transparency, Risk Management and International Financial Fragility

    Citation:

    Draghi, Mario, Francesco Giavazzi, and Robert C. Merton. "Transparency, Risk Management and International Financial Fragility." Harvard Business School Working Paper, No. 03-118, June 2003. (Also NBER Working Paper Series, No. 9806.) View Details
  6. Future Possibilities in Finance Theory and Finance Practice

    Citation:

    Merton, Robert C. "Future Possibilities in Finance Theory and Finance Practice." Harvard Business School Working Paper, No. 01-030, December 2000. View Details
  7. A Model of Contract Guarantees for Credit-Sensitive, Opaque Financial Intermediaries

    Citation:

    Merton, Robert C. "A Model of Contract Guarantees for Credit-Sensitive, Opaque Financial Intermediaries." Harvard Business School Working Paper, No. 97-091, May 1997. View Details
  8. A Conceptual Framework for Analyzing the Financial Environment

    Citation:

    Merton, Robert C., and Zvi Bodie. "A Conceptual Framework for Analyzing the Financial Environment." Harvard Business School Working Paper, No. 95-062, January 1995. View Details
  9. Financial Infrastructure and Public Policy: A Functional Perspective

    Citation:

    Merton, Robert C., and Zvi Bodie. "Financial Infrastructure and Public Policy: A Functional Perspective." Harvard Business School Working Paper, No. 95-064, January 1995. View Details
  10. The Informational Role of Asset Prices: The Case of Implied Volatility

    Citation:

    Bodie, Zvi, and Robert C. Merton. "The Informational Role of Asset Prices: The Case of Implied Volatility." Harvard Business School Working Paper, No. 95-063, January 1995. View Details
  11. A Framework for the Economic Analysis of Deposit Insurance and Other Guarantees

    Citation:

    Bodie, Zvi, and R. Merton. "A Framework for the Economic Analysis of Deposit Insurance and Other Guarantees." Harvard Business School Working Paper, No. 92-063, January 1992. View Details
  12. On the Management of Deposit Insurance and Other Guarantees

    Citation:

    Merton, Robert C., and Zvi Bodie. "On the Management of Deposit Insurance and Other Guarantees." Harvard Business School Working Paper, No. 92-081, January 1992. View Details
  13. Pension Reform and Privatization in International Perspective: A Case of Israel

    Citation:

    Bodie, Zvi, and Robert C. Merton. "Pension Reform and Privatization in International Perspective: A Case of Israel." Harvard Business School Working Paper, No. 92-082, January 1992. View Details
  14. Earnings Variability and Variance Bounds Tests for Rationality of Stock Market Prices

    Citation:

    Merton, Robert C., and Terry A. Marsh. "Earnings Variability and Variance Bounds Tests for Rationality of Stock Market Prices." Sloan School of Management Working Paper, No. 1559-84, April 1984. View Details
  15. Aggregate Dividend Behavior and Its Implications for Tests of Stock Market Rationality

    Citation:

    Marsh, Terry A., and Robert C. Merton. "Aggregate Dividend Behavior and Its Implications for Tests of Stock Market Rationality." Sloan School of Management Working Paper, No. 1475-83, September 1983. View Details
  16. Continuous-Time Portfolio Theory and the Pricing of Contingent Claims

    Citation:

    Merton, Robert C. "Continuous-Time Portfolio Theory and the Pricing of Contingent Claims." Sloan School of Management Working Paper, No. 881-76, November 1976. View Details
  17. A Dynamic General Equilibrium Model of the Asset Market and Its Application to the Pricing of the Capital Structure of the Firm

    Citation:

    Merton, Robert C. "A Dynamic General Equilibrium Model of the Asset Market and Its Application to the Pricing of the Capital Structure of the Firm." Sloan School of Management Working Paper, No. 497-70, December 1970. (Chapter 11 in Continuous-Time Finance.) View Details

Cases and Teaching Materials

  1. Smith Breeden Associates: The Equity Plus Fund (A)

    In early 1997, Smith Breeden Associates, a money management and consulting firm, was pondering the future of the Equity Plus Fund. The Equity Plus Fund was an S&P enhanced-index fund that tried to outperform the S&P Index by replicating the index using low-cost derivative strategies and investing the remaining cash in a hedged portfolio of mortgage-backed securities. The fund had performed well since inception, with an annualized total return above that of the S&P Index. However, this performance had not resulted in significant growth of the fund's assets. With its performance record, Smith Breeden had a number of options. It could market the fund more aggressively, it could offer other sector-specific funds, or it could set up an enhanced index fund based on an international stock-market index.

    Keywords: Assets; Cash; Financial Markets; Financial Strategy; Mortgages; Investment Funds; Investment Portfolio; Marketing; Performance; Consulting Industry;

    Citation:

    Merton, Robert C., and Alberto Moel. "Smith Breeden Associates: The Equity Plus Fund (A)." Harvard Business School Case 297-089, February 1997. (Revised March 1998.) View Details
  2. Harrington Financial Group

    In early 1997, Harrington Bank, a small Indiana savings and loan (thrift) wondered what its next move should be. Harrington was acquired in 1988 by the principals of Smith Breeden Associates, a money-management and consulting firm specializing in the application of modern financial technology to the pricing, hedging, and risk management of mortgage securities. The Smith Breeden principals had established an arms-length contract with Harrington, where Smith Breeden advised Harrington on the pricing, hedging, active management, and risk management of Harrington's assets and liabilities. Since the acquisition, the bank had done very well. Assets had grown from $75 million in 1988 to over $520 million at the end of 1996. Its net interest margin had more than tripled, core operating profits had grown by over 400%, and return on equity had been substantially increased. Still, Harrington in 1996 was not an average thrift. 80% of its assets consisted of mortgage-backed securities (vs. 30% for the median thrift), and most of its liabilities were not deposits but other forms of wholesale funding.

    Keywords: Banks and Banking; Mergers and Acquisitions; Price; Risk Management; Mortgages; Contracts; Asset Management; Investment; Financial Services Industry;

    Citation:

    Merton, Robert C., and Alberto Moel. "Harrington Financial Group." Harvard Business School Case 297-088, February 1997. (Revised April 1997.) View Details
  3. Savings and Loans and the Mortgage Markets

    Provides a brief overview of the history of the savings and loans, the savings and loans crisis of the 1980s and 1990s, and the creation of the mortgage markets in the United States. Also explains briefly the most common types of mortgage-backed securities available.

    Keywords: History; Debt Securities; Markets; Mortgages; United States;

    Citation:

    Merton, Robert C., and Alberto Moel. "Savings and Loans and the Mortgage Markets." Harvard Business School Background Note 297-090, February 1997. View Details

Other Publications and Materials

  1. Disclose the Fair Value of Complex Securities

    Keywords: Value; Financial Instruments; Corporate Disclosure;

    Citation:

    Kaplan, Robert, Robert C. Merton, and Scott Richard. "Disclose the Fair Value of Complex Securities." Financial Times Ltd., August 2009. (op-ed.) View Details
  2. Optimal Portfolio Rules in Continuous Time When the Nonnegativity Constraint on Consumption is Binding

    Citation:

    Merton, Robert C. "Optimal Portfolio Rules in Continuous Time When the Nonnegativity Constraint on Consumption is Binding." December 1989. (In Chapter 6 of Continuous-Time Finance.) View Details
  3. Corporate Dividend Dynamics at the Firm Level

    Keywords: Investment Return;

    Citation:

    Marsh, Terry A., and Robert C. Merton. "Corporate Dividend Dynamics at the Firm Level." MIT Sloan School of Management, April 1985. (Unpubished manuscript.) View Details
  4. Analytical Optimal Control Theory as Applied to Stochastic and Non-Stochastic Economics

    Keywords: Mathematical Methods; Economics;

    Citation:

    Merton, Robert C. "Analytical Optimal Control Theory as Applied to Stochastic and Non-Stochastic Economics." Ph.D. diss., Massachusetts Institute of Technology (MIT), 1970. View Details
  5. An Empirical Investigation of the Samuelson Rational Warrant Pricing Theory

    Keywords: Mathematical Methods; Price;

    Citation:

    Merton, Robert C. "An Empirical Investigation of the Samuelson Rational Warrant Pricing Theory." January 1969. (Chapter V in Ph.D. dissertation; Class paper, Massachusetts Institute of Technology, spring 1969.) View Details
  6. Restrictions on Rational Option Pricing: A Set of Arbitrage Conditions

    Keywords: Stock Options; Valuation; Trade;

    Citation:

    Merton, Robert C. "Restrictions on Rational Option Pricing: A Set of Arbitrage Conditions." Massachusetts Institute of Technology (MIT), August 1968. Mimeo. View Details