Stochastic Differential Utility as the Continuous-Time Limit of Recursive Utility

Stochastic differential utility as the continuous-time limit of recursive utility

We establish a convergence theorem that shows that discrete-time recursive utility, as developed by Kreps and Porteus (1978), converges to stochastic differential utility, as introduced by Duffie and Epstein (1992), in the continuous-time limit of vanishing grid size.

Recursive Utility for Stochastic Trees

Stochastic trees are semi-Markov processes represented using tree diagrams. Such trees have been found useful for prescriptive modeling of temporal medical treatment choice. We consider utility functions over stochastic trees which permit recursive evaluation in a graphically intuitive manner analogous to decision tree rollback. Such rollback is computationally intractable unless a low-dimensio...

Discrete-time Recursive Utility

This paper focuses on the fundamentals of discrete-time models using recursive utility. We examine the relation between preferences, utility, and aggregator, the existence of optimal paths, and several notions of impatience. In the one-sector model, we characterize optimal paths and derive a turnpike theorem. Topics beyond the scope of this paper include continuous time recursive utility, model...

Consumption-Based Asset Pricing with Recursive Utility

In this paper it has been attempted to investigate the capability of the consumption-based capital asset pricing model (CCAPM), using the general method of moment (GMM), with regard to the Epstien-zin recursive preferences model for Iran's capital market. Generally speaking, recursive utility permits disentangling of the two psychologically separate concepts of risk aversion and elasticity of i...

Recursive Utility : Discrete Time Theory ∗