DocumentCode
2905844
Title
Solving Principal-Agent Problem with Dynamic Programming Method
Author
Ren, Xiaoyu
Author_Institution
Inst. of Econ., Xuzhou Normal Univ., Xuzhou, China
fYear
2011
fDate
17-18 Oct. 2011
Firstpage
662
Lastpage
664
Abstract
The paper studies Principal-agent problem with dynamic Programming Method. So as to find the optimal contact between a principal and an agent, we make a model in dynamic state process to maximize the expected utility of the agent and obtain the famous Hamilton-Jacobi-Bellman equation. Furthermore, we derive closed-form solution of HJB equation with a power utility function.
Keywords
dynamic programming; economics; optimisation; stock markets; utility theory; Hamilton-Jacobi-Bellman equation; dynamic programming method; dynamic state process; economic relationship; expected utility maximization; financial market; power utility function; principal-agent optimal contact; principal-agent problem; Closed-form solutions; Contracts; Dynamic programming; Economics; Equations; Mathematical model; Stochastic processes; Dynamic programming method; HJB equation; Principal-agent problem; Stochastic differential equation; Stochastic optimal control;
fLanguage
English
Publisher
ieee
Conference_Titel
Business Intelligence and Financial Engineering (BIFE), 2011 Fourth International Conference on
Conference_Location
Wuhan
Print_ISBN
978-1-4577-1541-9
Type
conf
DOI
10.1109/BIFE.2011.109
Filename
6121227
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