Authors:
- Reviewed by international experts
- Surveys recent results in a systematic way
- Enables derivation of many qualitative economic conclusions
- Includes supplementary material: sn.pub/extras
Part of the book series: Springer Finance (FINANCE)
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Table of contents (11 chapters)
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Front Matter
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Introduction
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Front Matter
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First Best: Risk Sharing Under Full Information
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Front Matter
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Second Best: Contracting Under Hidden Action—The Case of Moral Hazard
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Front Matter
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Third Best: Contracting Under Hidden Action and Hidden Type—The Case of Moral Hazard and Adverse Selection
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Front Matter
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Backward SDEs and Forward-Backward SDEs
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Front Matter
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Back Matter
About this book
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.
Reviews
“The book under review provides a complete treatment of the principal-agent problem that covers all cases treated in economic literature … . It is the first of its kind in that it provides a fully developed mathematical framework addressing the principal-agent problem with complete proofs and explanations of all mathematical tools used therein. … The introduction of this book is accessible to a general audience.” (Olympia Hadjiliadis, Bulletin of the American Mathematical Society, Vol. 52 (3), July, 2015)
“The present book presents a nice exposition of the theory of the stochastic maximum principle, starting with BSDEs, and of its applications to contract theory. … I recommend it to anyone working on or teaching the mathematical aspects of contract theory and/or stochastic control.” (Etienne Pardoux, SIAM Review, Vol. 57 (2), June, 2015)
“This book considers contract theory in continuous time. … This book is a good reference book for researchers and graduate students in economic theory, finance and mathematical economics. Continuous-time contract theory is particularly useful in finance. This book provides a basic methodological framework, which can be used to develop further advances, both in applications and in theory.” (Susheng Wang, Mathematical Reviews, August, 2013)Authors and Affiliations
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Div. of the Humanities, Social Science, California Institute of Technology, Pasadena, USA
Jakša Cvitanić
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Department of Mathematics, University of Southern California, Los Angeles, USA
Jianfeng Zhang
About the authors
Bibliographic Information
Book Title: Contract Theory in Continuous-Time Models
Authors: Jakša Cvitanić, Jianfeng Zhang
Series Title: Springer Finance
DOI: https://doi.org/10.1007/978-3-642-14200-0
Publisher: Springer Berlin, Heidelberg
eBook Packages: Mathematics and Statistics, Mathematics and Statistics (R0)
Copyright Information: Springer-Verlag Berlin Heidelberg 2013
Hardcover ISBN: 978-3-642-14199-7Published: 26 September 2012
Softcover ISBN: 978-3-642-43352-8Published: 15 October 2014
eBook ISBN: 978-3-642-14200-0Published: 24 September 2012
Series ISSN: 1616-0533
Series E-ISSN: 2195-0687
Edition Number: 1
Number of Pages: XII, 256
Topics: Quantitative Finance, Game Theory, Economics, Social and Behav. Sciences, Systems Theory, Control