##### Department of Mathematics,

University of California San Diego

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### Math 288 - Probability

## Jaksa Cvitanic

#### USC

## Principal-Agent Problems in Continuous Time

##### Abstract:

Motivated by the problems of optimal compensation of executives and of investment fund managers, we consider principal-agent problems in continuous time, when the principal\'s and the agent\'s risk-aversion are modeled by standard utility functions. The agent can control both the drift (the ``mean\") and the volatility (the ``variance\"") of the underlying stochastic process. The principal decides what type of contract/payoff to give to the agent. We use martingale/duality methods familiar from the theory of continuous-time optimal portfolio selection. Our results depend on whether the agent can control the drift independently of the volatility

Host: Ruth Williams

### May 22, 2003

### 10:00 AM

### AP&M 6438

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