Optimal contracts in continuous-time models
type: Item
instance of: scholarly article
title: Optimal contracts in continuous-time models
zbMATH Open document ID: 1140.91433
DOI: 10.1155/JAMSA/2006/95203
author: Jakša Cvitanić
author: Xuhu Wan
author: Jianfeng Zhang
published in: Journal of Applied Mathematics and Stochastic Analysis
publication date: 2008-08-15T00:00:00Z
full work available at URL: https://eudml.org/doc/54323
review text: Summary: We present a unified approach to solving contracting problems with full information in models driven by Brownian motion. We apply the stochastic maximum principle to give necessary and sufficient conditions for contracts that implement the so-called first-best solution. The optimal contract is proportional to the difference between the underlying process controlled by the agent and a stochastic, state-contingent benchmark. Our methodology covers a number of frameworks considered in the existing literature. The main finance applications of this theory are optimal compensation of company executives and of portfolio managers.
Mathematics Subject Classification ID: 91B40
Mathematics Subject Classification ID: 60H30
Mathematics Subject Classification ID: 60H10
Mathematics Subject Classification ID: 91B24
Mathematics Subject Classification ID: 91B28
zbMATH DE Number: 5312395
MaRDI profile type: Publication
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OpenAlex ID: W2142453219
description: scientific article; zbMATH DE number 5312395