An existence theorem of intertemporal recursive utility in the presence of Lévy jumps |
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Authors: | Chenghu Ma |
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Institution: | Department of Accounting, Finance and Management, University of Essex, Colchester, Essex CO4 3SQ UK |
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Abstract: | This paper presents an existence theorem for a class of backward stochastic integral equations. The main contribution is a generalization of Duffie and Epstein's Duffie, D., Epstein, L., 1992. Stochastic differential utility, (Appendix C with Skiadas C.), Econometrica 60, 353–394.] existence theorem of intertemporal recursive utility to allow the information structure to be driven by a Lévy jump process. The existence theorem applies also for a more general class of utility functions, such as recursive utility with habit-formation, and can be used to prove the existence of an equilibrium asset price process as a unique solution to the stochastic Euler equation derived by Ma Ma, C., 1993b. Valuation of Derivative Securities with Mixed Poisson–Brownian Information and Recursive Utility, McGill University, mimeo.]. |
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Keywords: | Existence theorem Intertemporal recursive utility Lé vy jumps |
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