Singular recursive utility

Kristina R. Dahl and Bernt {\O}ksendal

Papers from arXiv.org

Abstract: We introduce the concept of singular recursive utility. This leads to a kind of singular BSDE which, to the best of our knowledge, has not been studied before. We show conditions for existence and uniqueness of a solution for this kind of singular BSDE. Furthermore, we analyze the problem of maximizing the singular recursive utility. We derive sufficient and necessary maximum principles for this problem, and connect it to the Skorohod reflection problem. Finally, we apply our results to a specific cash flow. In this case, we find that the optimal consumption rate is given by the solution to the corresponding Skorohod reflection problem.

Date: 2015-04, Revised 2017-03
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1504.08170

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