Download this Paper Open PDF in Browser

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

SAFE Working Paper No. 17

23 Pages Posted: 13 May 2013  

Holger Kraft

Goethe University Frankfurt

Frank Thomas Seifried

University of Trier

Multiple version iconThere are 2 versions of this paper

Date Written: 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 fferential utility, as introduced by Duffie and Epstein (1992), in the continuous-time limit of vanishing grid size.

Keywords: stochastic diff erential utility, recursive utility, convergence, backward stochastic di fferential equation

JEL Classification: D81, D91

Suggested Citation

Kraft, Holger and Seifried, Frank Thomas, Stochastic Differential Utility as the Continuous-Time Limit of Recursive Utility (May 10, 2013). SAFE Working Paper No. 17. Available at SSRN: https://ssrn.com/abstract=2264293 or http://dx.doi.org/10.2139/ssrn.2264293

Holger Kraft (Contact Author)

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Frank Thomas Seifried

University of Trier ( email )

Department IV - Mathematics
Universitätsring 19
Trier, 54296
Germany

HOME PAGE: http://sites.google.com/site/seifriedfinance/

Paper statistics

Downloads
158
Rank
75,227
Abstract Views
605