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Incentive-compatible contracts for the sale information

Biais, Bruno and Germain, Laurent Incentive-compatible contracts for the sale information. (2002) The Review of Financial Studies, vol. 15 (n° 4). pp. 987-1003. ISSN 0893-9454

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Abstract

An informed financial institution can trade on private information and also sell it to clients through a managed fund. To provide an incentive for the informed agent to trade in the interest of her client, the optimal contract requires that she be compensated as an increasing function of the profits of the fund. The optimal contract is also designed to limit the aggressiveness of the sum of the fund's trade and the proprieatary trade. This reduces information revelation and thes leads to greater overall trading profits than if the informed agent only conducted proprietary trades.

Item Type:Article
Audience (journal):International peer-reviewed journal
Uncontrolled Keywords:
Institution: Université de Toulouse > Institut Supérieur de l'Aéronautique et de l'Espace - ISAE
Université de Toulouse > Groupe École Supérieure de Commerce de Toulouse - ESCT
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Deposited By: odile huynh
Deposited On:12 Jul 2012 08:13

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