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Stochastic Differential Utility as the Continuous-Time Limit of Recursive UtilityHolger KraftGoethe University Frankfurt Frank Thomas SeifriedUniversity of Kaiserslautern May 10, 2013 Abstract: We establish a convergence theorem that shows that discrete-time recursive utility, as developed by Kreps and Porteus (1978), converges to stochastic di erential utility, as introduced by Due and Epstein (1992), in the continuous-time limit of vanishing grid size.
Number of Pages in PDF File: 21 Keywords: stochastic differential utility, recursive utility, convergence, backward stochastic differential equation JEL Classification: D81, D91 working papers seriesDate posted: June 29, 2011 ; Last revised: May 12, 2013Suggested CitationContact Information
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