学术讲座

Optimal Contracting with Unobservable Managerial Hedging

时间:2018-04-25

Finance Seminar2018-13


Topic: Optimal Contracting with Unobservable Managerial Hedging

Speaker: Nengjiu Ju, Shanghai Jiao Tong University

Time: Wednesday, 25 April, 10:00-11:30

Location: Room 217, Guanghua Building 2


Abstract:

We develop a continuous-time model where a risk-neutral principal contracts with a CARA manager protected by limited liability to run a project. Its output can be increased by costly unobservable managerial effort, but it is liquidated if the manager quits. The manager can trade a market portfolio in an unobservable private account to hedge market risk in his compensation. New to the literature, our model setup permits compatibility of private saving and hedging, manager’s risk aversion, and inefficient project liquidation in one contracting problem. Our optimal contract is a dynamic mixture of relative and absolute performance evaluations. This provides potentially a new explanation to the lack of relative performance evaluation in practice. Moreover, negative market shocks increase project liquidation probability, consistent with the heightened managerial turnover in bad market conditions. Finally, the optimal contract is implemented by risk management accounts, private debt and private equity in an entrepreneurship context.


Introduction:

Nengjiu Ju is a Professor of Finance at Shanghai Advanced Institute of Finance (SAIF). Before joining SAIF, Professor Ju was associate professor of finance in Hong Kong University of Science and Technology (HKUST, 2005 – 2013). He was assistant professor of finance in University of Maryland at College Park (1998 – 2005).

Professor Ju focuses his research on derivatives pricing, dynamic capital structures, financial econometrics, decision-making under ambiguity preferences, and continuous-time agency models. Professor Ju has published widely in leading academic journals such as Econometrica, Review of Financial Studies, Journal of Financial Economics, Management Science, Journal of Financial and Quantitative Analysis, Journal of Business, etc.

Professor Ju is the recipient of the inaugural Best Student Paper Award, Conference on Computational Intelligence for Financial Engineering, 1998, New York City, for his paper "Fourier Transformation, Martingale, and the Pricing of Average-Rate Derivatives". He is also the recipient of the TCW Best Paper Award (with Hui Chen, and Jianjun Miao), China International Conference in Finance, 2009, Guangzhou, for their paper "Dynamic Asset Allocation with Ambiguous Return Predictability".

Professor Ju offers the courses “Investments” and “Derivative Securities” at SAIF. He has extensive teaching experiences at many levels: Equity Valuation (MBA, University of Maryland); Investment and Portfolio Management (undergraduate, University of Maryland and HKUST): Futures and Options (undergraduate, HKUST); Foundation of Financial Economics (PhD, University of Maryland), and Continuous-Time Finance (PhD, HKUST).

Professor Ju received his Ph.D. in Finance (1998) from University of California at Berkeley and Ph.D. in Physics (1993) from Michigan State University.

http://www.saif.sjtu.edu.cn/show-55-14.html


Your participation is warmly welcomed!

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