Contract Theory in Continuous-Time Models

Contract Theory in Continuous-Time Models
Author :
Publisher : Springer Science & Business Media
Total Pages : 258
Release :
ISBN-10 : 9783642142000
ISBN-13 : 3642142001
Rating : 4/5 (001 Downloads)

Book Synopsis Contract Theory in Continuous-Time Models by : Jakša Cvitanic

Download or read book Contract Theory in Continuous-Time Models written by Jakša Cvitanic and published by Springer Science & Business Media. This book was released on 2012-09-24 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years there has been a significant increase of interest in continuous-time Principal-Agent models, or contract theory, and their applications. Continuous-time models provide a powerful and elegant framework for solving stochastic optimization problems of finding the optimal contracts between two parties, under various assumptions on the information they have access to, and the effect they have on the underlying "profit/loss" values. This monograph surveys recent results of the theory in a systematic way, using the approach of the so-called Stochastic Maximum Principle, in models driven by Brownian Motion. Optimal contracts are characterized via a system of Forward-Backward Stochastic Differential Equations. In a number of interesting special cases these can be solved explicitly, enabling derivation of many qualitative economic conclusions.


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