Relative Existence for Recursive Utility

60 Pages Posted: 8 Aug 2019

See all articles by Walt Pohl

Walt Pohl

NHH Norwegian School of Economics; University of Zurich

Karl Schmedders

University of Zurich

Ole Wilms

Tilburg School of Economics and Management

Date Written: August 5, 2019

Abstract

Existence theorems for endowment economies with growth and sophisticated recursive preferences have proven difficult to come by. We offer a simple proof technique that covers many models of interest, such as the Bansal-Yaron long-run risk model, models with stochastic volatility and jumps, models with volatility of volatility and models with consumption disasters and time-varying intensities. We also prove existence for models with smooth ambiguity aversion and learning. Collectively these results cover many of the leading asset pricing models today.

Keywords: Asset pricing, long-run risk, recursive utility, relative existence

JEL Classification: G11, G12

Suggested Citation

Pohl, Walt and Schmedders, Karl and Wilms, Ole, Relative Existence for Recursive Utility (August 5, 2019). Available at SSRN: https://ssrn.com/abstract=3432469 or http://dx.doi.org/10.2139/ssrn.3432469

Walt Pohl

NHH Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway

University of Zurich ( email )

Moussonstrasse 15
Zürich, 8044
Switzerland

Karl Schmedders

University of Zurich ( email )

Moussonstrasse 15
Zürich, CH-8044
Switzerland
+41 (0)44 634 3770 (Phone)

Ole Wilms (Contact Author)

Tilburg School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

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