Fischer Sheffey Black American economist, one of the authors of the Black-Scholes formula Date of Birth: 11.01.1938 Country: USA

1. Biography of Fischer Black
2. Education and Early Career
3. Academic and Professional Life
4. The Black-Scholes Formula
5. Legacy and Recognition

Biography of Fischer Black

Fischer Black was an American economist and one of the authors of the Black-Scholes formula. He conducted extensive research in monetary theory, various monetary policies, business cycles, inflation and hyperinflation phenomena, speculative pricing, and more.

Education and Early Career

In 1959, Black graduated from Harvard College, where he later defended his doctoral dissertation in applied mathematics titled "Deductive Question-Answer System." However, he had to simultaneously study at the Massachusetts Institute of Technology (MIT) under Professor Marvin Minsky before presenting his work at Harvard.

Academic and Professional Life

Black worked at the University of Chicago from 1971 and later joined the faculty at the MIT Sloan School of Management. In 1984, he joined Goldman Sachs, one of the world's largest commercial banks known as "The Firm" in financial circles.

The Black-Scholes Formula

During the 1970s, Black became interested in monetary and credit policies. His significant contribution to the field of economics was the development of an original formula for valuing options or secondary securities. He aimed to accurately calculate and predict whether purchasing a particular option would be profitable or not. Initially, Black attempted to solve the problem using algebra but realized that the answer did not lie in equations. He then proposed that the option's valuation might not require knowledge of the stock price. Eventually, he and Myron Scholes, whom he met at an economic event, solved this problem together.

In 1973, Black and Scholes published their joint work, "The Pricing of Options and Corporate Liabilities," in the Journal of Political Economy. They formulated the Black-Scholes equation, which estimates the "fair value" of an option. Robert C. Merton further developed and refined this formula, making it more universal and practically significant.

Legacy and Recognition

Unfortunately, Fischer Black did not receive the Nobel Prize in Economics for his contributions as he passed away before its announcement. The Nobel Prize is not awarded posthumously. However, Merton and Scholes received the Nobel Prize in 1997 for their work. The perceived injustice of this situation sparked discussions within economic circles. It is worth noting that Black was not strictly an economist, as his doctorate was in applied mathematics. He was primarily a scientist and only secondarily a businessman, with a keen interest in stock options.

Fischer Black passed away on August 30, 1995, after battling throat cancer diagnosed in 1994. Despite a positive prognosis following initial surgery, the cancer returned. Since 2002, the American Finance Association has awarded young scholars the Fischer Black Prize every two years in his honor.