Book Review. Continuous-Time Finance. Robert C. Merton

Abstract

Continuous-Time Finance. Robert C. Merton. Oxford, U.K.: Easil Blackwell, 1990. 700 pp., $56.95 (cloth). ISBN 0-631-15847-2. In his essay on “Ramsey as an Economist,” John Maynard Keynes alludes to economics in the following terms: 1 “… the delightful paths of our own most agreeable branch of moral sciences, in which theory and fact, intuitive imagination and practical judgment, are blended in a manner comfortable to the human intellect.” Robert C. Merton’s book entitled “ Continuous-Time Finance ,” which comes to us more than 20 years after his first paper appeared in the Review of Economics and Statistics , squarely fits this description. During these two decades, Merton published several path-breaking papers spanning a broad spectrum of topics in economics and finance, including options, corporate debt, consumption portfolio rules, stochastic growth theory, capital asset pricing, and financial intermediation. Some of these papers are classics and on the required reading lists of most Ph.D. programs in finance and economics around the world.