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Gain/Loss Asymmetric Stochastic Differential Utility

Yuki Shigeta

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: This study examines a gain/loss asymmetric utility in continuous time in which the investor discounts their utility gain by more than the utility loss. By employing the theory of stochastic di erential utility, the model allows a time-variable sub- jective discount rate. In addition, the model can express various forms of utility functions including a version of the Epstein{Zin utility. Under the model, the opti- mal consumption/wealth ratio and portfolio weight have di erent functional forms depending on whether the state variables stay in some region.

Keywords: Gain/Loss Asymmetry; Stochastic Di erential Utility; Consumption{Investment Problem (search for similar items in EconPapers)
JEL-codes: D15 G11 G40 (search for similar items in EconPapers)
Pages: 47
Date: 2019-08
New Economics Papers: this item is included in nep-evo, nep-ore and nep-upt
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Journal Article: Gain/loss asymmetric stochastic differential utility (2020) Downloads
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