Contract Theory in Continuous-Time Models by Jakša Cvitanic, Jianfeng Zhang

By Jakša Cvitanic, Jianfeng Zhang

In fresh years there was an important elevate of curiosity in continuous-time Principal-Agent versions, or agreement idea, and their purposes. Continuous-time types supply a strong and stylish framework for fixing stochastic optimization difficulties of discovering the optimum contracts among events, less than a number of assumptions at the details they've got entry to, and the impression they've got at the underlying "profit/loss" values. This monograph surveys fresh result of the speculation in a scientific means, utilizing the strategy of the so-called Stochastic greatest precept, in versions pushed through Brownian Motion.

Optimal contracts are characterised through a procedure of Forward-Backward Stochastic Differential Equations. In a few attention-grabbing precise situations those could be solved explicitly, permitting derivation of many qualitative financial conclusions.

Show description

Read Online or Download Contract Theory in Continuous-Time Models PDF

Best game theory books

Differential Games: A Mathematical Theory with Applications to Warfare and Pursuit, Control and Optimization

Filenote: PDF retail from EBL. Publisher/EBL seem to have created it via taking their great epub and switched over to PDF instead of the common appealing PDF imprint.
Publish yr observe: First released in 1999 via Dover Publications

One of the definitive works in video game thought, this quantity takes an unique and professional examine clash ideas. Drawing on video game idea, the calculus of diversifications, and regulate idea, the writer solves an awesome array of difficulties in terms of army occasions, pursuit and evasion strategies, athletic contests, and plenty of extra.

Clearly targeted examples; quite a few calculations.

Social Choice and Strategic Decisions: Essays in Honor of Jeffrey S. Banks (Studies in Choice and Welfare)

Social offerings, approximately charges on executive courses, or approximately public coverage extra extensively, or certainly from any available set of possible choices, are decided by means of politics. This ebook is a set of essays that tie jointly the fields spanned by way of Jeffrey S. Banks' learn in this topic. It examines the strategic facets of political decision-making, together with the alternatives of electorate in committees, the location of applicants in electoral campaigns, and the habit of events in legislatures.

Schelling's Game Theory: How to Make Decisions

Thomas Schelling, who wrote the foreword for this ebook, received the Nobel Prize in economics for "having stronger our figuring out of clash and cooperation via game-theory research. " This got here after he had taught a path in video game thought and rational option to complicated scholars and govt officers for forty five years.

Extra info for Contract Theory in Continuous-Time Models

Example text

11 hold. 9) and it is an interior point of A. Let W A,∗ , Z A,∗ , W P ,λ,∗ , Z P ,λ,∗ , D ∗ be the corresponding processes. 24) + ZtP ,λ,∗ ∂c IA t, c∗ , ZtA,∗ = 0. 25) A t, D, z , z P ,z A = 0. 26) ZsA,∗ dBs − IA s, IP2 s, Ds∗ , ZsA,∗ , ZsP ,λ,∗ , ZsA,∗ ds ; WtP ,λ,∗ = UP IP1 DT∗ T + t uP s, IP2 s, Ds∗ , ZsA,∗ , ZsP ,λ,∗ + λs WsA,∗ − λs Rs ds T − t ZsP ,λ,∗ dBs − IA s, IP2 s, Ds∗ , ZsA,∗ , ZsP ,λ,∗ , ZsA,∗ ds , and the principal’s optimal control satisfies CT∗ = IP1 DT∗ , ct∗ = IP2 t, Dt∗ , ZtA,∗ , ZtP ,λ,∗ .

63, 134–139 (1973). Papers and Proceedings of the Eighty-fifth Annual Meeting of the American Economic Association Chapter 4 The General Risk Sharing Problem Abstract In this chapter we consider general diffusion dynamics for the output process with a general cost function depending on the agent’s actions and/or the output values. The main qualitative conclusions from the case of linear drift dynamics of the previous section still hold true with nonlinear drift dynamics—a linear benchmark contract is optimal, and it implements the first best actions.

35) below. 26) . 27) γt,s vs dBs . 0 The adjoint processes Y¯ 1,∗ , Y¯ 2,∗ satisfy Y¯t1,∗ = UP XT∗ − CT∗ + T + t T Y¯s1,∗ rs + Y¯s2,∗ μs ds t Y¯s1,∗ bv s, u∗s , vs∗ + Y¯s2,∗ gv s, u∗s , vs∗ dBs ; Y¯t2,∗ = −λUA CT∗ − G∗T − T t Z¯ s2,∗ dBs . 5) gives Y¯T1,∗ = −Y¯T2,∗ . We conjecture that optimal u∗ , v ∗ are deterministic processes, and that Y¯t2,∗ = −ht Y¯t1,∗ , hT = 1, where h is a deterministic function of time. Using Itô’s rule, it is easily verified that the above equality is satisfied if h is a solution to the ODE ht (ht μt − rt ) = −ht , hT = 1.

Download PDF sample

Rated 4.97 of 5 – based on 3 votes