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Escrow account and moral hazard

Garcia, Diego (2016) Escrow account and moral hazard. Master of Science thesis, Dublin City University.

Abstract
This paper investigates the optimal strategies for traders whom invest in the market on behalf of banks introducing the definition of the escrow account and its consequences on traders’ strategies by solving the Exponential Utility Maximization Problem with Hamilton-Jacobi-Belmann equation. Setting the model on the usual filtered probabilistic space in continuous time with a risky asset driven by an exponential Brownian Motion. This paper considers as well the option to trading on a Fraud Asset, which is a jump process, in order to maximize their expected utility function, i.e., their satisfaction given by their earnings. This aforementioned Fraud Asset could mean their dismissal from the bank. We find that there exists an equilibrium between their strategies in which each trader decides or not to invest in such an asset and will keep that strategy afterwards.
Metadata
Item Type:Thesis (Master of Science)
Date of Award:March 2016
Refereed:No
Supervisor(s):Guasoni, Paolo and Mayerhofer, Eberhard
Uncontrolled Keywords:Exponential Utility Maximization Problem; Fraud Asset; Trader Strategies
Subjects:Mathematics
DCU Faculties and Centres:DCU Faculties and Schools > Faculty of Science and Health > School of Mathematical Sciences
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 3.0 License. View License
Funders:Science Foundation Ireland
ID Code:21021
Deposited On:13 Apr 2016 13:10 by Paolo Guasoni . Last Modified 19 Jul 2018 15:07
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