Robert Merton - Academia.edu (original) (raw)

Papers by Robert Merton

The Review of Economic Studies, Jul 1, 1975

The Journal of Business, 1978

... trade-off generally shifts more in the other direction until for x >> 1 the inc... more ... trade-off generally shifts more in the other direction until for x >> 1 the increase in audit costs completely swamps the small reduction in ... Journal of Business ... An analytic derivation of the cost of deposit insurance and loan guarantees: an application of modem option pricing theory ...

World Scientific Publishing Company eBooks, Mar 1, 2019

RePEc: Research Papers in Economics, Apr 1, 1984

$Research paper thumbnail of Discussion: \The Value of Implicit Guarantees$

The conuence of rising home prices, declining interest rates, and near-frictionles renanc- ing op... more The conuence of rising home prices, declining interest rates, and near-frictionles renanc- ing opportunities led to vastly increased systemic risk in thenancial 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 synchro- nization, 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. 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, generating loss esti- mates of 1.6trillionfromJune2006toDecember2008underhistoricalmarketconditions,comparedwithsimulatedlossesof1.6 trillion from June 2006 to December 2008 under historical market conditions, compared with simulated losses of 1.6trillionfromJune2006toDecember2008underhistoricalmarketconditions,comparedwithsimulatedlossesof311 billion in the absence of equity extractions. We use option pricing technology to estimate commonly used option sensitivities (delta, gamma and vega) for the U.S. residential mortgage system. These metrics have the potential to be used as ex-ante quantitative measures of systemic risk in the mortgage system.

RePEc: Research Papers in Economics, Sep 1, 2004

Interview with Professor Robert C. Merton at the 1st Meeting of Laureates in Economic Sciences in... more Interview with Professor Robert C. Merton at the 1st Meeting of Laureates in Economic Sciences in Lindau, Germany, September 1-4, 2004. Interviewer is freelance journalist Marika Griehsel.

In a rare event, three Nobel prize winners in economics discuss retirement: theirs, that of the c... more In a rare event, three Nobel prize winners in economics discuss retirement: theirs, that of the current generation approaching retirement, and that of future generations. In particular, their comments address the impact of the current financial crisis on everyone’s retirement aspirations.

Harvard Business Review, 2004

RePEc: Research Papers in Economics, Aug 1, 1970

Page 1. JOURNAL OF ECONOMIC THEDRY 3, 373-413 (1971) Optimum Consumption and Portfolio Rules in a... more Page 1. JOURNAL OF ECONOMIC THEDRY 3, 373-413 (1971) Optimum Consumption and Portfolio Rules in a Continuous-Time Model* ROBERT C. MERTQN ...

Financial and monetary policy studies, 2019

Page 1. CORPORATE DIVIDEND DYNAMICS AT THE FIRM LEVEL* Terry A. Marsh Robert C. Merton Sloan Scho... more Page 1. CORPORATE DIVIDEND DYNAMICS AT THE FIRM LEVEL* Terry A. Marsh Robert C. Merton Sloan School of Management Massachusetts Institute of Technology 50 Memorial Drive Cambridge, MA 02139 First Draft: April, 1985 Page 2. ...

Social Science Research Network, Apr 3, 2017

To address the looming retirement crisis, many governments are introducing new pension programmes... more To address the looming retirement crisis, many governments are introducing new pension programmes tied to employment for uncovered workers (NEST in the UK and Secure Choice in some US states). These attempt to improve access to pensions, and continue a trend of transferring responsibility for retirement security from governments and employers (via defined benefit [DB] plans) to the individual (via defined contribution [DC] plans), as neither governments nor companies are willing to bear the liabilities associated with pension obligations. This shift requires new thinking about how portfolios are managed and which instruments are available to investors. Our proposed SeLFIES (Standard of Living indexed, Forward-starting, Income-only Securities) make individuals self-reliant and are also advantageous for governments.

Social Science Research Network, 2012

Firms considered "too big to fail'' (TBTF) benefit from access to cheaper funding du... more Firms considered "too big to fail'' (TBTF) benefit from access to cheaper funding during crises. Using a comprehensive data set of bond characteristics and prices in the primary and secondary market for a sample of 74 U.S. financial institutions, we investigate how reduced debt capital costs affect the positions of shareholders and creditors. Issue and transaction prices are revalued on the basis of a funding advantage estimated using a structural model. Our results indicate that wealth transfers to investors sum up to $365bn and that banks shifted to fixed-rate short-term funding to take advantage of their TBTF status.

RePEc: Research Papers in Economics, 1976