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Stochastic differential utility as the continuous-time limit of recursive utility

Holger Kraft and Frank Thomas Seifried

No 17, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We establish a convergence theorem that shows that discrete-time recursive utility, as developed by Kreps and Porteus (1978), converges to stochastic differential utility, as introduced by Duffie and Epstein (1992), in the continuous-time limit of vanishing grid size.

Keywords: Stochastic differential utility; recursive utility; convergence; backward stochastic differential equation (search for similar items in EconPapers)
JEL-codes: D81 D91 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ore and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:17

DOI: 10.2139/ssrn.2264293

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