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dc.contributor.authorKraft, Holgeren_US
dc.contributor.authorSeifried, Frank Thomasen_US
dc.description.abstractThis paper relates recursive utility in continuous time to its discrete-time origins and provides a rigorous and intuitive alternative to a heuristic approach presented in [Duffie, Epstein 1992], who formally define recursive utility in continuous time via backward stochastic differential equations (stochastic differential utility). Furthermore, we show that the notion of Gâteaux differentiability of certainty equivalents used in their paper has to be replaced by a different concept. Our approach allows us to address the important issue of normalization of aggregators in non-Brownian settings. We show that normalization is always feasible if the certainty equivalent of the aggregator is of expected utility type. Conversely, we prove that in general Lévy frameworks this is essentially also necessary, i.e. aggregators that are not of expected utility type cannot be normalized in general. Besides, for these settings we clarify the relationship of our approach to stochastic differential utility and, finally, establish dynamic programming results.en_US
dc.publisherUniv., Fachbereich Wirtschaftswiss. Frankfurt am Mainen_US
dc.relation.ispartofseriesWorking paper series // Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften Finance & accounting 196en_US
dc.subject.keywordrecursive utilityen_US
dc.subject.keywordstochastic differential utilityen_US
dc.subject.keywordLévy frameworken_US
dc.subject.keywordcertainty equivalentsen_US
dc.subject.keyworddynamic programmingen_US
dc.subject.stwStochastischer Prozessen_US
dc.subject.stwDynamische Optimierungen_US
dc.titleFoundations of continuous-time recrusive utility: Differentiability and normalization of certainty equivalentsen_US
dc.typeWorking Paperen_US
Appears in Collections:Working Paper Series: Finance and Accounting, Universität Frankfurt a. M.

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