Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/238119
Year of Publication: 
2020
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 641
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
We study an intertemporal consumption and portfolio choice problem under Knightian uncertainty in which agent's preferences exhibit local intertemporal substitution. We also allow for market frictions in the sense that the pricing functional is nonlinear. We prove existence and uniqueness of the optimal consumption plan, and we derive a set of sufficient first-order conditions for optimality. With the help of a backward equation, we are able to determine the structure of optimal consumption plans. We obtain explicit solutions in a stationary setting in which the financial market has different risk premia for short and long positions.
Subjects: 
Hindy-Huang-Kreps preferences
Knightian uncertainty
g-expectation
ambiguityaversion
singular stochastic control
JEL: 
C61
D11
D81
G11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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