̽»¨ÊÓƵ

THE Algebra that underlies derivatives trading has won two United States professors the Nobel prize for economics. The $1 million (Pounds 600,000) prize from the Royal Swedish Academy of Sciences went to Robert Merton of Harvard University and Myron Scholes of Stanford who, with the late Fischer Black, devised a new way to value stock options. According to the committee, it was "among the foremost contributions to economic sciences over the last 25 years". The "Black-Scholes" formula was published in 1973. It realised the price of an option should depend on the expected volatility of its underlying share or bond.