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Journal articles
Efficient Consumption Set Under Recursive Utility and Unknown Beliefs
Abstract : In a context of complete financial markets where asset prices follow Ito's processes, we characterize the set of consumption processes which are optimal for a given stochastic differential utility (e.g. Duffie and Epstein (1992)) when beliefs are unknown. Necessary and sufficient conditions for the efficiency of a consumption process, consists of the existence of a solution to a quadratic backward stochastic differential equation and a martingale condition. We study the efficiency condition in the case of a class of homothetic stochastic differential utilities and derive some results for those particular cases. In a Markovian context, this efficiency condition becomes a partial differential equation.
https://hal-hec.archives-ouvertes.fr/hal-00485712
Contributor : Antoine Haldemann <>
Submitted on : Friday, May 21, 2010 - 3:22:33 PM
Last modification on : Friday, December 18, 2020 - 5:30:02 PM
Contributor : Antoine Haldemann <>
Submitted on : Friday, May 21, 2010 - 3:22:33 PM
Last modification on : Friday, December 18, 2020 - 5:30:02 PM