A two-dimensional control problem arising from dynamic contracting theory

Décamps, Jean‐Paul; Villeneuve, Stéphane

doi:10.1007/s00780-018-0376-4

Cited by 8 publications

(5 citation statements)

References 26 publications

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“…PSO finds the best value through particle interaction, but when the search space is very high, its convergence speed becomes very slow near the global optimal value. In this paper, PSO convergence related analysis is divided into four categories: particle motion stability analysis, particle motion trajectory analysis, algorithm local convergence analysis and expected time analysis of the first hit [7][8].…”

Section: Convergence Of Particle Swarm Optimization Algorithmmentioning

confidence: 99%

Dynamic Financial Asset Allocation Strategy Based on Particle Swarm Optimization Algorithm

Yan¹

2023

Proceedings of the 3rd International Conference on Big Data Economy and Information Management, BDEIM 2022, December 2-3, 2022,

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With the continuous improvement and development of the financial market, the allocation of financing assets has become a hot topic. In the financial market, the imbalance of capital supply and demand is very common. Therefore, in order to grasp the financial dynamics in time, it is necessary to conduct relevant analysis on its asset allocation. In order to improve the accuracy of calculation, this paper proposes the application of particle swarm optimization algorithm. This paper mainly uses digital modeling and data comparison to study the dynamic financial asset allocation strategy. The experimental results show that the TSVL-DPM model has the strongest ability to predict asset allocation, and the minimum error is 2.01.

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Section: Convergence Of Particle Swarm Optimization Algorithmmentioning

confidence: 99%

Dynamic Financial Asset Allocation Strategy Based on Particle Swarm Optimization Algorithm

Yan¹

2023

Proceedings of the 3rd International Conference on Big Data Economy and Information Management, BDEIM 2022, December 2-3, 2022,

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“…The book of Cvitanić and Zhang [19] focusing on the use of backward stochastic differential equations (BSDEs) is a case in point. So are the papers [60,20], and the more recent work of Cvitanić, Possamaï and Touzi [18] published in Finance and Stochastics. By highlighting clearly the real nature of Sannikov's trick, the latter became instrumental in the recent mathematical developments on the subject.…”

Section: Contract Theorymentioning

confidence: 99%

The influence of economic research on financial mathematics: Evidence from the last 25 years

Carmona

2021

Finance Stoch

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“…Nonetheless, existence of optimal contracts is not addressed there, and the results rely on the assumption that it is never optimal to retire the agent temporarily, while our approach actually proves that this is the case. We also would like to refer to the recent work of Décamps and Villeneuve [20], where the authors study a related, but different, contracting problem, and where again the heart of the analysis is technical clarity: this should be an additional illustration that actually proving rigorously results in this literature is a challenging task.…”

Section: Introductionmentioning

confidence: 99%

Is there a Golden Parachute in Sannikov's principal-agent problem?

Possamaï¹,

Touzi²

2020

Preprint

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This paper provides a complete review of the continuous-time optimal contracting problem introduced by Sannikov [54], in the extended context allowing for possibly different discount rates of both parties. The agent's problem is to seek for optimal effort, given the compensation scheme proposed by the principal over a random horizon. Then, given the optimal agent's response, the principal determines the best compensation scheme in terms of running payment, retirement, and lump-sum payment at retirement.A Golden Parachute is a situation where the agent ceases any effort at some positive stopping time, and receives a payment afterwards, possibly under the form of a lump sum payment, or of a continuous stream of payments. We show that a Golden Parachute only exists in certain specific circumstances. This is in contrast with the results claimed by Sannikov [54], where the only requirement is a positive agent's marginal cost of effort at zero. Namely, we show that there is no Golden Parachute if this parameter is too large. Similarly, in the context of a concave marginal utility, there is no Golden Parachute if the agent's utility function has a too negative curvature at zero.In the general case, we provide a rigorous analysis of this problem, and we prove that an agent with positive reservation utility is either never retired by the principal, or retired above some given threshold (as in Sannikov's solution). In particular, different discount factors induce naturally a face-lifted utility function, which allows to reduce the whole analysis to a setting similar to the equal-discount rates one. Finally, we also confirm that an agent with small reservation utility does have an informational rent, meaning that the principal optimally offers him a contract with strictly higher utility value.

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A two-dimensional control problem arising from dynamic contracting theory

Cited by 8 publications

References 26 publications

Dynamic Financial Asset Allocation Strategy Based on Particle Swarm Optimization Algorithm

Dynamic Financial Asset Allocation Strategy Based on Particle Swarm Optimization Algorithm

The influence of economic research on financial mathematics: Evidence from the last 25 years

Is there a Golden Parachute in Sannikov's principal-agent problem?

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