Control problems with recursive multiple-priors utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with locally-constrained entropy RMPU (LCE-RMPU) that is tractable even in the presence of a stochastic opportunity set and incomplete markets. We find that time variation in the LCE-based ambiguity set is able to capture important features of consumption and asset markets data.
Sbuelz, A., Trojani, F., Asset prices with locally constrained-entropy recursive multiple-priors utility, <<JOURNAL OF ECONOMIC DYNAMICS & CONTROL>>, 2008; 32 (11): 3695-3717. [doi:10.1016/j.jedc.2008.03.002] [http://hdl.handle.net/10807/22245]
Asset prices with locally constrained-entropy recursive multiple-priors utility
Sbuelz, Alessandro;
2008
Abstract
Control problems with recursive multiple-priors utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with locally-constrained entropy RMPU (LCE-RMPU) that is tractable even in the presence of a stochastic opportunity set and incomplete markets. We find that time variation in the LCE-based ambiguity set is able to capture important features of consumption and asset markets data.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
