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Published in:
2009 | OriginalPaper | Chapter
Asset Allocation and Optimal Contract for Delegated Portfolio Management
Authors : Jingjun Liu, Jianfeng Liang
Published in: Cutting-Edge Research Topics on Multiple Criteria Decision Making
Publisher: Springer Berlin Heidelberg
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This article studies the portfolio selection and the contracting problems between an individual investor and a professional portfolio manager in a discrete-time principal-agent framework. Portfolio selection and optimal contracts are obtained in closed form. The optimal contract was composed with the fixed fee, the cost, and the fraction of excess expected return. The optimal portfolio is similar to the classical two-fund separation theorem.