Stochastic Differential Utility as the Continuous-Time Limit of Recursive Utility
SAFE Working Paper No. 17
23 Pages Posted: 13 May 2013
Date Written: May 10, 2013
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.
Keywords: stochastic differential utility, recursive utility, convergence, backward stochastic differential equation
JEL Classification: D81, D91
Suggested Citation: Suggested Citation