The special sphere of finance within economics is the study of allocation and deployment of economic resources, both spatially and across time, in an uncertain environment. To capture the influence and interaction of time and uncertainty effectively requires sophisticated mathematical and computational tools.
One week before my 17th birthday, I had a blind date with June Rose, a television actress on network soap operas, a model, and a regular on the popular Dick Clark's Saturday night 'American Bandstand' show from New York. We were married five years later, one week after my graduation from Columbia.
I think in the case of my father, in terms of the things that influenced me, he never pressed me to go into academics or pressed me to go to a field, and indeed, my behavior was largely to move as far the other direction. I don't think that's uncommon with people with very successful parents.
As an undergraduate at Columbia, I went to the engineering school. I had a great deal of training in engineering and mathematics as well as subdiversified training. And then I went to the California Institute of Technology to do my Ph.D. in applied math.
School work and intellectual interests such as music and the arts were not especially important to me while I was growing up, although mathematics, my favorite subject, was fun. Baseball was my first passion: I played sand lot and Little League and rooted for the Brooklyn Dodgers.
My mother taught me caring and sensitivity towards the feelings of others, animals as well as humans. She gave me much good, practical advice for getting through life.
My decision to leave applied mathematics for economics was in part tied to the widely-held popular belief in the 1960s that macroeconomics had made fundamental inroads into controlling business cycles and stopping dysfunctional unemployment and inflation.
My principal contribution to the Black-Scholes option-pricing theory was to show that the dynamic trading strategy prescribed by Black and Scholes to offset the risk exposure of an option would provide a perfect hedge in the limit of continuous trading.
As it happens, although I was at MIT on the faculty full-time for 18 years and then at Harvard for another 16, so I've always been in full-time academia, I always found it was both beneficial for my research and beneficial for the other work to be involved in the practicing community.
And at a relatively early age, ten or so, I invested my first share of stock. And I used to follow, look at companies and so forth. But throughout the whole period, and indeed right through my college years, while I was involved in the stock market, always interested in finance, I never thought of it as a full-time job.
In college I started studying the stock market. I went down to the stock exchange, watched all the activity from the visitors' gallery, people running around, calling numbers, shouting, and all the paper flying and the bells ringing, and of course that was exciting, and it seemed to lend itself to my analytical skills.
