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Theory of Finance from the Perspective of Continuous Time

Published online by Cambridge University Press:  19 October 2009

Robert C. Merton
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Extract

It is not uncommon on occasions such as this to talk about the shortcomings in the theory of Finance, and to emphasize how little progress has been made in answering the basic questions in Finance, despite enormous research efforts. Indeed, it is not uncommon on such occasions to attack our basic “mythodology,” particularly the “Ivory Tower” nature of our assumptions, as the major reasons for our lack of progress. Like a Sunday morning sermon, such talks serve many useful functions. For one, they serve to deflate our professional egos. For another, they serve to remind us that the importance of a contribution as judged by our professional peers (the gold we really work for) is often not closely aligned with its operational importance in the outside world. Also, such talks serve to comfort those just entering the field, by letting them know that there is much left to do because so little has been done. While such talks are not uncommon, this is not what my talk is about. Rather, my discussion centers on the positive progress made in the development of a theory of Finance using the continuous-time mode of analysis.

Type
VIII. Distinguished Speaker Series
Information
Journal of Financial and Quantitative Analysis , Volume 10 , Issue 4 , November 1975 , pp. 659 - 674
Copyright
Copyright © School of Business Administration, University of Washington 1975

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References

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