TY  - UNPD
A1  - Kraft, Holger
A1  - Seifried, Frank Thomas
T1  - Foundations of continuous-time recursive utility : differentiability and normalization of certainty equivalents
T2  - Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 196
N2  - This 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 L´evy 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. JEL Classifications: D81, D91, C61
T3  - Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting - 196 
KW  - recursive utility
KW  - stochastic differential utility
KW  - L´evy framework
KW  - certainty equivalents
KW  - normalization
KW  - dynamic programming
KW  - Nutzen
Y1  - 2009
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/6243
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-62768
PB  - Univ., Fachbereich Wirtschaftswiss.
CY  - Frankfurt am Main
ER  -