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Contract Theory in Continuous-Time Models

Cvitanić, Jakša and Zhang, Jianfeng (2013) Contract Theory in Continuous-Time Models. Springer Finance. Springer , Berlin. ISBN 978-3-642-14199-7.

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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.

Item Type:Book
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URLURL TypeDescription
Cvitanić, Jakša0000-0001-6651-3552
Additional Information:© 2013 Springer-Verlag Berlin Heidelberg.
Subject Keywords:forward-backward SDEs; optimal contracts; principal-agent problems; quantitative finance; stochastic maximum principle
Series Name:Springer Finance
Classification Code:MSC: 91G80, 93E20
Record Number:CaltechAUTHORS:20200203-133006886
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:101077
Deposited By: Tony Diaz
Deposited On:03 Feb 2020 21:35
Last Modified:16 Nov 2021 17:59

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