In a continuous-time framework, the issue of how to delegate an investor's portfolio decision to a portfolio manager is studied. First, we solve the first-best problem. For the second-best case, a specific quadratic contract is introduced resolving the agency conflict completely in the sense...

In a continuous-time framework, the issue of how to delegate an investor's portfolio decision to a portfolio manager is studied. Firstly, we solve the first-best problem where the investor is able to force the manager to implement a certain strategy. For the second-best case, a specific...

Credit risk is an important issue of current research in finance. While there is a lot of work on modelling credit risk and on valuing credit derivatives there is no work on continuous-time portfolio optimization with defaultable securities. Therefore, in this paper we solve investment problems...

Credit risk is an important issue of current research in finance. While there is a lot of work on modelling credit risk and on valuing credit derivatives there is no work on continuous-time portfolio optimization with defaultable securities. Therefore, in this paper we solve investment problems...

In this paper we present some counter-examples to show that an uncritical application of the usual methods of continuous-time portfolio optimization can be misleading in the case of a stochastic opportunity set. Cases covered are problems with stochastic interest rates, stochastic volatility,...