Contract Theory

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Dictionary Says

Definition of 'Contract Theory'

The study of how individuals and businesses construct and develop legal agreements. Contract theory analyzes how parties to a contract make decisions under uncertain conditions, and when there is asymmetric information. It draws upon principles of financial and economic behavior, as principles and agents often have different incentives to perform or not perform actions.
Investopedia Says

Investopedia explains 'Contract Theory'

Contract theory is closely related to game theory, which looks at the decision-making process followed by individuals and businesses. Contracts can be incentivized in order to promote certain outcomes, but can also contain a level of moral hazard stemming from the distance between the principle and agent.
Search results for

'Contract Theory'

  • Moral Hazards: A Bump In The Contract Road

    http://www.investopedia.com/articles/financial-theory/09/moral-hazard-conflict.asp
    Moral Hazards: A Bump In The Contract Road. March 09 2009 | Filed Under » Economics,
    Financial Theory, Insurance, Options. A moral hazard occurs when a party to ...

  • What is the difference between an options contract and a futures ...

    http://www.investopedia.com/ask/answers/09/options-vs-futures.asp
    ... More Categories; Bonds; Economics; Markets; Taxes; Financial Careers; Financial
    Theory; ... What is the difference between an options contract and a futures contract ...

  • CFA Level 1 Study Guide - Derivatives - Terminating a Forward ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/terminating-forward-contracts-prior-to-expiration.asp
    ... The Tradeoff Theory of Leverage; 11.28 Signaling Prospects Through Financing ... and
    Contracts: Settlement Procedures; 15.14 Terminating a Forward Contract Prior to ...

  • Alternative Assets For Average Investors

    http://www.investopedia.com/articles/financial-theory/08/alternative-assets.asp
    ... Alternative assets are none of the above, which is why they are called "alternative."
    An example of an alternative asset is a commodity futures contract. ...

  • How Do Futures Contracts Work?

    http://www.investopedia.com/video/play/futures-contract-explained
    ... contract is used to transfer risk between different parties. Filed Under » Alternative
    Investments, Derivatives, Economics, Financial Crisis, Financial Theory ...

  • After exercising a put option, can I still hold my option contract ...

    http://www.investopedia.com/ask/answers/09/put-option-sell-lower-price.asp
    ... More Categories; Bonds; Economics; Markets; Taxes; Financial Careers; Financial
    Theory; ... After exercising a put option, can I still hold my option contract in order ...

  • Does the seller (the writer) of an option determine the details of ...

    http://www.investopedia.com/ask/answers/05/051605.asp
    ... Does the seller (the writer) of an option determine the details of the option
    contract? The quick answer is yes and no. It all depends ...

  • Introduction To E-Micro Forex Futures

    http://www.investopedia.com/articles/forex/10/introduction-to-emicro-forex-futures.asp
    ... Figure 1 shows a comparison of contract specifications between the standard currency
    futures contracts and their corresponding E-micro contracts. ...

  • My brokerage firm won't allow naked option positions. What does ...

    http://www.investopedia.com/ask/answers/05/NakedOptions.asp
    ... refers to a situation in which a trader sells an option contract without holding
    a ... are regarded as very risky because some positions can, in theory, lead to an ...

  • Introduction To Currency Futures

    http://www.investopedia.com/articles/forex/10/introduction-currency-futures.asp
    ... Figure 1 An example of a currency future price chart; in this case, the
    euro/US dollar futures contract. Source: Created with TradeStation. ...

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