- Fischer Black
Infobox Scientist
name = Fischer Black
box_width = 26em
image_width = 225
caption =
birth_date =January 11 1938
birth_place = Georgetown, U.S.
death_date = death date and age|1995|8|30|1938|1|11
death_place = New York, U.S.
residence =
citizenship =
nationality =
ethnicity =
field =Economics Mathematical Finance
work_institutions =
University of Chicago, GSB
MIT Sloan School of Management
Goldman Sachs
alma_mater =Harvard University
doctoral_advisor =Anthony Oettinger
doctoral_students =
known_for = Black-Scholes equation Black-76 modelBlack-Derman-Toy model Black-Karasinski model Black-Litterman model Black's approximation
author_abbrev_bot =
author_abbrev_zoo =
prizes = 1994, IAFE Financial Engineer of the Year [cite web|url= http://www.iafe.org/award.html |title= IAFE Events Archive, Awards |accessdate= 2007-06-20 ] [cite news | first = Jim | last = Finnegan | title = IAFE Holds Annual Award Dinner | url = http://www.fenews.com/fen37/one_time_articles/iafe_duffie/iafe_duffie.html | publisher = Financial Engineering News | accessdate = 2007-06-20]
religion =
footnotes =Fischer Sheffey Black (
January 11 ,1938 -August 30 ,1995 ) was an Americaneconomist , best known as one of the authors of the famousBlack-Scholes equation.Background
Black received a
Ph.D. inApplied Mathematics fromHarvard University in 1964. He was a student ofMarvin Minsky [ [http://web.media.mit.edu/~minsky/ Marvin Minsky's Home Page ] ] [Perry Mehrling, "Fischer Black and the Revolutionary Idea of Finance", Wiley (2005), 400 pages, ISBN 978-0471457329] and worked on problems inArtificial Intelligence . In 1971 he began to work at theUniversity of Chicago . He later left the University of Chicago to work at theMIT Sloan School of Management . In 1984 he joinedGoldman Sachs .Economic career
Black began thinking seriously about
monetary policy around 1970, and found at this time that the big debate in this field was betweenKeynesian s andmonetarist s. The Keynesians (under the leadership, at that moment, ofFranco Modigliani ) believe there is a natural tendency of the credit markets toward instability, toward boom and bust, and they assign to both monetary andfiscal policy roles in dampening down this cycle, working toward the goal of smooth sustainable growth. In the Keynesian view, central bankers have to have discretionary powers to fulfill their role properly. Monetarists, under the leadership ofMilton Friedman , believe that discretionary central banking is the problem, not the solution. Friedman believed that the growth of the money supply could and should be set at a constant rate, say 3% a year, to accommodate predictable population growth.On the basis of the
capital asset pricing model , Black concluded that discretionary monetary policy could not do the good that Keynesians wanted it to do. But he also concluded that it could not do the harm monetarists feared it would do. Black said in a letter to Friedman, in January 1972:"In the U.S. economy, much of the public debt is in the form of Treasury bills. Each week, some of these bills mature, and new bills are sold. If the Federal Reserve System tries to inject money into the private sector, the private sector will simply turn around and exchange its money for Treasury bills at the next auction. If the Federal Reserve withdraws money, the private sector will allow some of its Treasury bills to mature without replacing them."
In 1973, Black, along with
Myron Scholes published the paper 'The Pricing of Options and Corporate Liabilities' in 'The Journal of Political Economy'. [cite web |url= http://links.jstor.org/sici?sici=0022-3808(197305/06)81:3%3C637:TPOOAC%3E2.0.CO;2-P |title= The Pricing of Options and Corporate Liabilities |accessdate= 2008-04-05] This was his most famous work and included theBlack-Scholes equation .In March 1976, Black proposed that human capital and business have "ups and downs that are largely unpredictable [...] because of basic uncertainty about what people will want in the future and about what the economy will be able to produce in the future. If future tastes and technology were known, profits and wages would grow smoothly and surely over time." A boom is a period when technology matches well with demand. A bust is a period of mis-match.
Illness and death
In early 1994, Black was diagnosed with throat cancer. Surgery at first appeared successful, and Black was well enough to attend the annual meeting of the
International Association of Financial Engineers that October, where he received their award as Financial Engineer of the Year. But the cancer returned, and Black died in August 1995.Posthumous recognition
The
Nobel Prize is not given posthumously, so it was not awarded to Black in 1997 when his co-authorMyron Scholes received the honor for their landmark work on option pricing along withRobert C. Merton , another pioneer in the development of valuation of stock options. In the announcement of the award that year, the Nobel committee prominently mentioned Black's key role.Black has also received recognition as the co-author of the Black-Derman-Toy interest-rate derivatives model, which was developed for in-house use by Goldman Sachs in the 1980s but eventually published.
Fischer Black Prize
In 2002, the
American Finance Association established the awardedFischer Black Prize . The award is given to a young researcher whose body of work "best exemplifies the Fischer Black hallmark of developing original research that is relevant to finance practice." [cite web |url= http://www.afajof.org/association/fischerblack.asp |title= American Finance Association, Fischer Black Prize |accessdate= 2007-06-20]The inaugural prize was presented in 2003 and recipients have been:
* Raghuram G. Rajan, 2003. For work on "the role of institutions in finance and their effects on economic growth." [George Constantinides, chairman of prize selection committee, in: cite news | first = Jesamine | last = Chan | title = Rajan wins first Fischer Black Prize | url = http://chronicle.uchicago.edu/030123/black-prize.shtml | publisher = The University of Chicago Chronicle | date =2003-01-23 | accessdate = 2007-06-20]*
Tobias J. Moskowitz , 2007. For "ingenious and careful use of newly available data to address fundamental questions in finance." [American Finance Association announcement quote in: cite news | title = University of Chicago Graduate School of Business Professor Named Top Finance Scholar Under Age 40 by American Finance Association| url = http://www.chicagogsb.edu/newsmedia/releases/2007-01-10_moskowitz_award.aspx | publisher = Chicago Graduate School of Business | date =2007-01-10 | accessdate = 2007-06-20]No winner was announced in 2005. [cite news | title = Toby Moskowitz ('98) Receives 2007 Fischer Black Prize from American Finance Association | url = http://www.anderson.ucla.edu/x16627.xml | publisher = UCLA Anderson School of Management | accessdate = 2007-06-20]
References
elected bibliography
Literature on Fischer Black
* Fischer Black and the Revolutionary Idea of Finance, by
Perry Mehrling , published byWiley , August 2005, ISBN 0-471-45732-9Publications by Fischer Black
* Fischer Black, Myron Scholes, & Micheal Jensen, "The Capital-Asset Pricing Model: Some empirical tests", in Jensen, editor, Studies in the Theory of Capital Markets (1972).
* Fischer Black & Myron Scholes, "The Pricing of Options and Corporate Liabilities", "Journal of Political Economy" (1973).
* F. Black & M. Scholes, "The Effects of Dividend Yield and Dividend Policy on Common Stock Prices and Returns", Journal of Financial Economics (1974).
* F. Black, "Fact and Fantasy in the Use of Options", Financial Analysts Journal 31, pp36-41, 61-72 (July/August 1975).
* F. Black, "The Pricing of Commodity Contracts", 1976, Journal of Financial Economics.
* F. Black, "Noise", "Journal of Finance", vol. 41, pp. 529-543 (1986).
* Fischer Black, "Business Cycles and Equilibrium", Basil Blackwell, 1987.
* F. Black, E. Derman, & W. Toy, "A One-Factor Model of Interest Rates and its Application to Treasury Bond Options", "Financial Analyst Journal" (1990).
* F. Black & R. Litterman, "Global Portfolio Optimization", "Financial Analysts Journal" vol. 48, no. 5, pp. 28-43 (1992).
* F. Black, "Interest Rates as Options", "Journal of Finance", vol. 50, pp. 1371-1376 (1995).
* Fischer Black, "Exploring General Equilibrium", MIT Press, 1995.
External links
* NobelPrize.org [http://nobelprize.org/economics/laureates/1997/press.html]
* Bradley University [http://bradley.bradley.edu/~arr/bsm/model.html]
* CEPA [http://cepa.newschool.edu/het/profiles/black.htm]
* Financial Engineering News [http://www.fenews.com/fen44/one_time_articles/fischer-black/fischer-black-book.htm]
* Columbia University [http://cedar.barnard.columbia.edu/faculty/mehrling/understanding_fischer_black.pdf]
Persondata
NAME = Black, Fischer
ALTERNATIVE NAMES =
SHORT DESCRIPTION =Economist
DATE OF BIRTH =January 11 ,1938
PLACE OF BIRTH = Georgetown, U.S.
DATE OF DEATH =August 30 ,1995
PLACE OF DEATH = New York, U.S.
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