Stochastic Differential Utility as the Continuous-Time Limit of Recursive Utility
Seifried, Frank Thomas
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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.
stochastic differential utility, recursive utility, convergence, backward stochastic differential equation
Link to Publication
- LIF-SAFE Working Papers