Robert Merton was rewarded a Nobel Prize in Economics (along with Myron Scholes) for his work on "Analytical optimal control theory as applied to stochastic and non-stochastic economics." Or, to put it another way, he and Scholes were recognized for coming up with new ways of determining the value of derivatives. In this lecture at MIT he explains how put options, a type of derivative, are at the center of understanding the root cause of the global economic crisis:
Here's a good one page summation of Scholes and Merton's work on derivatives from Nova.
(Hat tip to Greg Mankiw and Arnold Kling)
Posted
04-16-2009 10:08 AM
by
Graham Griffith