Existence of Optimal Contracts for Principal-Agent Problem with Drift Control and Quadratic Effort Cost
Mathematical Finance
2025-03-19 v2
Abstract
The existence of optimal contracts of the principal-agent problem is a long-standing problem. According to the general framework in Cvitani\'c et al. [2], this existence can be derived from the existence of a classical solution to a degenerated fully nonlinear parabolic partial differential equation problem. In this work we consider the simple case with drift control and quadratic cost function, then prove the existence of classical solution to that PDE.
Keywords
Cite
@article{arxiv.2503.08503,
title = {Existence of Optimal Contracts for Principal-Agent Problem with Drift Control and Quadratic Effort Cost},
author = {Xinfu Chen and Shuaijie Qian and Guan Qiao},
journal= {arXiv preprint arXiv:2503.08503},
year = {2025}
}