©Rich Foreman Photography
2006 - Robert C. Merton
Nobel Laureate 1997
"How to Pursue Both Comparative Advantage and Efficient Diversification of Risk: An Application of Derivative Securities"
Harvard University

Robert C. Merton is the John and Natty McArthur University Professor at the Harvard Business School. He holds a B.S. in engineering mathematics from Columbia University (1966) and an M.S. in applied mathematics from California Institute of Technology (1967). After receiving a PhD in economics from Massachusetts Institute of Technology (1970), he served on the finance faculty of MIT's Sloan School of Management until 1988 when he moved to Harvard.

A past president of the American Finance Association and a member of the U.S. National Academy of Sciences, Professor Merton received the 1997 Alfred Nobel Memorial Prize in Economic Sciences. He has also been recognized for translating finance science into practice with several awards including the inaugural Financial Engineer of the Year from the International Association of Financial Engineers in 1993. The full list of his honoraria, academic recognitions, and administrative responsibilities is too long to present here. He currently teaches in both the MBA and PhD programs.

Professor Merton is best known for his path-breaking, continuous-time mathematical analyses of lifetime consumption-portfolio choice and capital asset pricing, as well as the pricing of options, general corporate liabilities, credit risk, financial guarantees, and other complex derivative securities. This work led to the famous Black-Scholes-Merton model and the development of the field of financial engineering. He has also written on the design, strategic management and regulation of financial institutions, including issues of innovation, capital budgeting, production and enterprise risk management. On the public policy side, Professor Merton has advocated both risk and value transparency for corporate and public pension plans, and that employee stock options be treated as income-statement expenses, consistent with other forms of compensation.
Professor Merton is the son of sociologist Robert K. Merton, who founded the sociology of science, invented the focus group, and created the concept of the “self-fulfilling prophecy.”