Expected Life-Time Utility and Hedging Demands in a Partially Observable Economy

Frederik Lundtofte ()

No 06-23, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor’s expected life-time utility, and analyze his hedging demands for intertemporal changes in the unobservable stochastic growth of the endowment process and the changing quality of information regarding these changes. The hedging demands consist of two components, which could work in opposite directions so that a conservative consumer may end up having positive hedging demands. Our results are qualitatively different from those within constant growth equilibria.

Keywords: learning; incomplete information; equilibrium; hedging demands (search for similar items in EconPapers)
JEL-codes: C13 G11 G12 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006-10
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Expected life-time utility and hedging demands in a partially observable economy (2008)
Working Paper: Expected Life-Time Utility and Hedging Demands in a Partially Observable Economy (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0623

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