Robert C. Merton, winner of the 1997 Nobel Prize in economics, said he will rejoin the faculty of the Massachusetts of Institute of Technology’s Sloan School of Management to focus on training students in quantitative finance.
Mr. Merton will teach in Sloan’s Master of Finance program, which was launched last year, MIT officials said Friday in a statement. He will retire from the Harvard Business School at the end of this month after 22 years, he said.
MIT, led by President Susan Hockfield, is poised to help shape the world’s financial infrastructure after the economic crisis that began in 2008, Mr. Merton said in the statement. He will retain his association with Harvard, also in Cambridge, as an emeritus professor.
“There’s a much greater need for people who understand complicated financial instruments and models,” Mr. Merton said in a telephone interview. “The financial crisis has brought it to the fore. There’s no financial institution in the world that can function without them. It’s an issue of using them properly and understanding them.”
Finance specialists with quantitative understanding are needed in central banks, the private sector and regulatory agencies, Mr. Merton said. While Harvard’s MBA students are highly qualified, the MIT finance program has a concentration of business students with the mathematical background and technical understanding to study the global impact of quantitative finance, Mr. Merton said.
“Our senior managers, our board members, and our regulators, don’t have to have Ph.D.’s in quantitative finance, but they really do need to understand the technologies and the risk transfers, and all the things in a modern financial system,” he said. “There’s a focus at MIT at the moment to develop programs to meet this need.”
Mr. Merton said he will also continue his work on the development of a next-generation pension system. His Nobel Prize-winning work, which he began at MIT, where he earned his Ph.D. and was on the faculty for 18 years before moving to Harvard, focused on a method for determining the value of derivatives.