Asset pricing and consumption-portfolio choice with recursive utility and unspanned risk : [version 4 august 2014]
- We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/ representative agent can be characterized by a specific semilinear partial differential equation. To date, the solution to this equation has mostly been approximated by Campbell-Shiller techniques, without addressing general issues of existence and uniqueness. We develop a novel approach that rigorously constructs the solution by a fixed point argument. We prove that under regularity conditions a solution exists and establish a fast and accurate numerical method to solve consumption-portfolio and asset pricing problems with recursive preferences and unspanned risk. Our setting is not restricted to affine asset price dynamics. Numerical examples illustrate our approach.
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| Verfasserangaben: | Holger KraftGND, Thomas Seiferling, Frank Thomas SeifriedGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-347720 |
| URL: | http://ssrn.com/abstract=2424706 |
| DOI: | https://doi.org/10.2139/ssrn.2424706 |
| Dokumentart: | Bericht |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2014 |
| Jahr der Erstveröffentlichung: | 2014 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 02.09.2014 |
| Freies Schlagwort / Tag: | FBSDE; asset pricing; consumption-portfolio choice; incomplete markets; stochastic differential utility |
| Ausgabe / Heft: | version 4 august 2014 |
| Seitenzahl: | 44 |
| Erste Seite: | 1 |
| Letzte Seite: | 44 |
| Bemerkung: | Date: first version: March 6, 2014; this version: August 4, 2014. |
| HeBIS-PPN: | 348104200 |
| Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
