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—the theory of recursive contracts. Recursive formulations allow us to reduce often complex models to a sequence of essentially … of the basic theory: the Revelation Principle, formulating and simplifying the incentive constraints, using promised … advanced topics: duality theory and Lagrange multiplier techniques, models with lack of commitment, and martingale methods in …
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A not-for-profit organization's reported ratio of expenditures on program services to total expenditures is a key performance metric for many donors, which may lead the manager of a not-for-profit organization to manipulate this ratio. This paper presents a theoretical model to examine when and...
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We consider a quasilinear parabolic equation with quadratic gradient terms. It arises in the modelling of an optimal portfolio which maximizes the expected utility from terminal wealth in incomplete markets consisting of risky assets and non-tradable state variables. The existence of solutions...
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We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the expected squared hedging error subject to a cost...
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