Being a weblog devoted to a variety of topics. Including Mathematics. And Mathematical Finance. Sometimes with homework.

Wednesday, January 21, 2009

21-270: Historical Revision

One of your classmates wrote to me to correct a historical inaccuracy in a comment I made on Friday. He writes

Today in lecture you mentioned that Robert Merton passed away before
receiving the Nobel prize for the work done in deriving the
Black-Scholes-Merton formula. I read a couple books over the summer,
one particularly about Fischer Black, and I believe from my readings
that Black was the one who passed away before receiving the Nobel
prize. I think that the reason Black-Scholes-Merton formula is more
prevalently known as just the Black-Scholes formula is because Black
and Scholes collaborated together on deriving the formula, using a
method known as the Capital Asset Pricing Model (CAPM). Merton, on
the other hand, believed CAPM to be faulty, but verified the
Black-Scholes formula later on with his own methods. Anyway, I just
thought that was an interesting bit of information.

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