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Optimal Contracts for Risk Managers
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- Authors
- Issue Date
- 2018-01
- Citation
- Seoul Journal of Economics, Vol.31 No.1, pp. 99-119
- Keywords
- Risk managers ; Risk-reducing effort ; Bonus contract
- Abstract
- This study analyzed the principal-agent problem, in which the agent performs risk management tasks, and considered the cost minimization problem of the principal, the objective of which is to design the cheapest contract inducing a target effort. Our results confirm that a one-step bonus contract should be used, which means that a bonus contract is most efficient for the principal in terms of incentive provision. A new condition to justify the first-order approach in our model was also provided.
- ISSN
- 1225-0279
- Language
- English
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