A Nobel Formula
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|Keith Devlin (Devlin's Angle)|
|The discovery of a single mathematical formula in 1970 led to this year's Nobel Prize for economics, shared between Stanford University professor of finance (emeritus) Myron Scholes and economist Robert C. Merton of Harvard University. The prize would undoubtedly have been shared with a third person, Fischer Black, but for the latter's untimely death in 1995. Discovered by Scholes and Black, and developed by Merton, the Black-Scholes formula tells investors what value to put on a financial derivative, such as a stock option. By turning what would otherwise be a guessing game into a mathematical science, the Black-Scholes formula made the derivatives market into the hugely lucrative industry it is today.|
|Levels:||High School (9-12), College, Research|
|Math Topics:||History and Biography, Stochastic Processes, Stock Market|
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