On portfolio delegation with moral hazard under translation ... - HIM

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Overview • Portfolio <strong>delegation</strong> as a Principal-Agent game • Reduction to a single recursion/BS∆E • Existence of optimal contract and strategies • Markovian setting • A related problem and continuous-time analog • Further research
Context • There is an investor (P) and a manager (A) • (P) delegates management of her investments to (A) • (A) has to be rewarded for his effort, which is costly • (P) designs a contract specifying payment structure of deal • (A) acts in his own self-interest; has an opportunity cost R • (P) wants to maximize her own well-being • (P) should not monitor/observe everything (A) does
Page 1: On portfolio delegation with moral
Page 5 and 6: The financial market, wealth and co
Page 7 and 8: Comments • The Agent’s optimiza
Page 9 and 10: Attainability Theorem (Existence of
Page 11 and 12: The Principal’s problem • If A
Page 13 and 14: The principal’s problem • (P) c
Page 15 and 16: Attainability of Principal’s prob
Page 17 and 18: Predictable representation property
Page 19 and 20: Markovian models Remark: Optimal ε
Page 21 and 22: Continuous-time analog • Define u
Page 23 and 24: To be better understood • Explore

On portfolio delegation with moral hazard under translation ... - HIM

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