Related papers: Delegated portfolio management with random default
In this paper, we construct a solution to the optimal contract problem for delegated portfolio management of the fist-best (risk-sharing) type. The novelty of our result is (i) in the robustness of the optimal contract with respect to…
In this paper we present a variational calculus approach to Principal-Agent problem with a lump-sum payment on finite horizon in degenerate stochastic systems, such as filtered partially observed linear systems. Our work extends the…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We analyze conditional optimization problems arising in discrete time Principal-Agent problems of delegated portfolio optimization with linear contracts. Applying tools from Conditional Analysis we show that some results known in the…
We study the problem of optimal portfolio selection under stochastic volatility within a continuous time reinforcement learning framework with portfolio constraints. Exploration is modeled through entropy-regularized relaxed controls, where…
We consider a general formulation of the Principal-Agent problem with a lump-sum payment on a finite horizon, providing a systematic method for solving such problems. Our approach is the following: we first find the contract that is optimal…
In delegation problems, a principal does not have the resources necessary to complete a particular task, so they delegate the task to an untrusted agent whose interests may differ from their own. Given any family of such problems and space…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
We consider a general formulation of the random horizon Principal-Agent problem with a continuous payment and a lump-sum payment at termination. In the European version of the problem, the random horizon is chosen solely by the principal…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
This paper proposes a method to design an optimal dynamic contract between a principal and an agent, who has the authority to control both the principal's revenue and an engineered system. The key characteristic of our problem setting is…
We give a new formulation of the relative arbitrage problem from stochastic portfolio theory that asks for a time horizon beyond which arbitrage relative to the market exists in all ``sufficiently volatile'' markets. In our formulation,…
We study a general class of Principal-Agent problems in continuous time under hidden action. By formulating the model as a coupled stochastic optimal control problem we are able to find a set of necessary conditions characterizing optimal…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
We consider a continuous time Principal-Agent model on a finite time horizon, where we look for the existence of an optimal contract both parties agreed on. Contrary to the main stream, where the principal is modelled as risk-neutral, we…
We study a generic principal-agent problem in continuous time on a finite time horizon. We introduce a framework in which the agent is allowed to employ measure-valued controls and characterise the continuation utility as a solution to a…
This article focuses on the mathematical problem of existence and uniqueness of BSDE with a random terminal time which is a general random variable but not a stopping time, as it has been usually the case in the previous literature of BSDE…
The recent work by Cvitani\'c, Possama\"i, and Touzi (2018) [9] presents a general approach for continuous-time principal-agent problems, through dynamic programming and second-order backward stochastic differential equations (BSDEs). In…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…