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Recursive Utility and Stochastic Differential Utility: From Discrete to Continuous Time

  • In this thesis, mathematical research questions related to recursive utility and stochastic differential utility (SDU) are explored. First, a class of backward equations under nonlinear expectations is investigated: Existence and uniqueness of solutions are established, and the issues of stability and discrete-time approximation are addressed. It is then shown that backward equations of this class naturally appear as a continuous-time limit in the context of recursive utility with nonlinear expectations. Then, the Epstein-Zin parametrization of SDU is studied. The focus is on specifications with both relative risk aversion and elasitcity of intertemporal substitution greater that one. A concave utility functional is constructed and a utility gradient inequality is established. Finally, consumption-portfolio problems with recursive preferences and unspanned risk are investigated. The investor's optimal strategies are characterized by a specific semilinear partial differential equation. The solution of this equation is constructed by a fixed point argument, and a corresponding efficient and accurate method to calculate optimal strategies numerically is given.

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Author:Thomas Seiferling
URN (permanent link):urn:nbn:de:hbz:386-kluedo-43808
Advisor:Frank Thomas Seifried
Document Type:Doctoral Thesis
Language of publication:English
Publication Date:2016/05/22
Year of Publication:2016
Publishing Institute:Technische Universität Kaiserslautern
Granting Institute:Technische Universität Kaiserslautern
Acceptance Date of the Thesis:2016/04/28
Date of the Publication (Server):2016/05/23
Number of page:XI, 207
Faculties / Organisational entities:Fachbereich Mathematik
DDC-Cassification:5 Naturwissenschaften und Mathematik / 510 Mathematik
Licence (German):Standard gemäß KLUEDO-Leitlinien vom 30.07.2015