Contract theory in Continuous-time

6 June 2008
14:15
Jaska Cvitanic
Abstract
This talk will give a survey of results in continuous-time contract theory, and discuss open problems and plans for further research on this topic. The general question is how a ``principal" (a company, investors ...) should design a payoff for compensating an ``agent" (an executive, a portfolio manager, ...) in order to induce the best possible performance. The following frameworks are standard in contract theory: (i) the principal and the agent have same, full information; (ii) the principal cannot monitor agent's actions (iii) the principal does not know agent's type We will discuss all three of these problems. The mathematical tools used are those of stochastic control theory, stochastic maximum principle and Forward Backward Stochastic Differential Equations.
  • Mathematical Finance Seminar