naa a22 4500 510808409 CHVBK 20180411083429.0 cr unu---uuuuu 180411e20130101xx s 000 0 eng 10.1007/s11579-012-0088-z doi (NATIONALLICENCE)springer-10.1007/s11579-012-0088-z Optimal contracting with effort and misvaluation [Elektronische Daten] [Agostino Capponi, Jakša Cvitanić, Türkay Yolcu] We propose a new continuous-time contracting model, in which the firm value process can only be observed with noise, and there are two sources of moral hazard: the agent's effort and misvaluation. The principal can induce the agent to alter the perceived fundamental value of the firm through misvaluation, thus changing the market estimate of that value. We consider two cases in detail: the one in which the market correctly anticipates only the effort, and the other in which it correctly anticipates both the effort and the amount of misvaluation. In the first case, we find that it is optimal for the principal to induce the agent to apply a non-zero amount of misvaluation. Using calculus of variation techniques, we find the optimal pay-per-performance sensitivity (PPS) of the contract and optimal effort and misvaluation amount, by means of solving of a second order ordinary differential equation. In the second case, which can be viewed as an extension of the seminal Holmstrom-Milgrom model to the case of noisy observations, we find that the optimal misvaluation value is zero, and we compare the resulting optimal contract to the Holmstrom-Milgrom contract. Springer-Verlag, 2012 Optimal contracts nationallicence Principal-agent problem nationallicence Variational calculus nationallicence Stochastic filtering nationallicence Moral hazard nationallicence Capponi Agostino School of Industrial Engineering, Purdue University, 47907, West Lafayette, IN, USA aut Cvitanić Jakša EDHEC Business School, 393 Promenades des Anglais, BP 3116, 06202, Nice Cedex 3, France aut Yolcu Türkay Department of Mathematics, Purdue University, 47907, West Lafayette, IN, USA aut Mathematics and Financial Economics Springer-Verlag 7/1(2013-01-01), 93-128 1862-9679 7:1<93 2013 7 11579 https://doi.org/10.1007/s11579-012-0088-z text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s11579-012-0088-z text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Capponi Agostino School of Industrial Engineering, Purdue University, 47907, West Lafayette, IN, USA aut NATIONALLICENCE 700 1- Cvitanić Jakša EDHEC Business School, 393 Promenades des Anglais, BP 3116, 06202, Nice Cedex 3, France aut NATIONALLICENCE 700 1- Yolcu Türkay Department of Mathematics, Purdue University, 47907, West Lafayette, IN, USA aut NATIONALLICENCE 773 0- Mathematics and Financial Economics Springer-Verlag 7/1(2013-01-01), 93-128 1862-9679 7:1<93 2013 7 11579 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer