Contract Theory and Corporate Finance – CTCF

The first papers integrating (exogenous) frictions in continuous time financial markets are due, among others, to Leland and DeMarzo. Building on these seminal articles,and using new mathematical methods developed in particular by Cvitanic and Touzi, we aim at developing a theory of contracts in continuous time. This theory will apply to the questions of optimal financing and risk management of corporations on the one hand, but also to real investment decisions that have so far been only studied under the assuption of perfect financial markets.