Recursive utility ambiguity

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August undefined, 2024

WebThis paper axiomatizes a form of recursive utility on consumption processes that permits a role for ambiguity as well as risk. The model has two prominent special cases: (i) the recursive model of risk preference due to Kreps and Porteus [18]; and (ii) an intertemporal version of multiple-priors utility due to Epstein and Schneider [8]. The generalization … WebAug 28, 2024 · Our analysis adopts recursive intertemporal preferences for decision makers that allow them to be ambiguity averse and concerned about the potential …

RECURSIVE AMBIGUITY AND MACHINA'S EXAMPLES

WebSuch behavior is inconsistent with subjective expected utility theory (SEU), ... 2.2.1 Recursive Utility 2.2.2 Updating and Learning 3. Ambiguity in Financial Markets ... multiplier utility and of the smooth ambiguity model are identical to those of SEU. In all three models, with standard speci ﬁcations, agents are locally risk neutral, ... WebNov 1, 2008 · Epstein and Schneider (2003) provide an axiomatically well-founded model of intertemporal utility that accommodates Knightian ambiguity aversion in discrete time. Because intertemporal utility is also recursive, they refer to it as recursive multiple-priors utility (RMPU). Chen and Epstein (2002) formulate a continuous-time counterpart of RMPU. hunter boots youth canada

Ambiguity and the value of information - JSTOR

WebIn order to accommodate a concern with ambiguity, we model agents as having recursive multiple-priors utility. This model of utility is a multi-period extension of Gilboa and Schmeidler (1989) whereby the single probability measure of the standard Savage model is replaced by a set of probabilities or priors. Chen and Epstein (2002) WebMar 1, 2024 · A recursive representation (for ≿) refers to a utility function over F ∪ Δ (X) defined by a μ ∈ Δ 2 (S) and a certainty equivalence function c on Δ (X) such that c (μ f) and c (p) give the utility of any f ∈ F and p ∈ Δ (X), respectively. A recursive preference is … Weba number of situations where Choquet expected utility, as well as other known models of ambiguity aversion, cannot capture plausible features of ambiguity attitudes. Most of these problems arise in choice over prospects involving three or more outcomes. We show that the recursive nonexpected utility model of Segal (International Economic Review 28 marty\u0027s cycle morristown

Does ambiguity matter? Estimating asset pricing models

WebOur analysis adopts recursive intertemporal preferences for decision makers that allow them to be ambiguity averse and concerned about the potential misspeciﬁcation of … Webother AA ambiguity theories to incorporate reference dependence, some ambiguity seek-ing, and other descriptive generalizations3 are a topic for future research. Dobbs (1991) also proposed a recursive utility-driven theory of ambiguity, but particularly argued for di⁄erent attitudes for gains than for losses, which he demonstrated in an ... hunter boots youth sizeWebMay 2, 2024 · Further, not all generalized recursive utility models can accommodate preferences over uncertainty in both domains. For these reasons, we provide the first experimental examination of uncertainty resolution with respect to subjective uncertainty, i.e., ambiguity, in addition to risk. hunter boots women wide calf

"Webformulate recursive multiple-priors utility in a continuous-time setting and show that it aords the Knightian distinction between risk and ambiguity. The corresponding discrete-time … " - Recursive utility ambiguity

Recursive utility ambiguity

Preferences for the Resolution of Risk and Ambiguity

http://people.stern.nyu.edu/dbackus/Exotic/1Ambiguity/EpsteinMiao%20JEDC%2003.pdf WebJun 4, 2008 · We use the multiple price list method and a recursive expected utility theory of smooth ambiguity to separate out attitude towards risk from that towards a Recursive …

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WebFeb 1, 2015 · The basic structure of recursive utility is due to Koopmans (1960) and Lucas and Stokey (1984), which decompose a utility function into current consumption and future utility in a nonlinear fashion. Epstein and Zin (1989) provide a theoretical framework in which the agent can have distinct attitudes toward intertemporal substitution and risk. WebMay 2, 2024 · Models of generalized recursive utility are becoming increasingly common as alternatives to discounted expected utility theory. These models have successfully …

Weba structural asset pricing model with smooth ambiguity utility. A number of studies are closely related to ours. Jeong, Kim, and Park (2015) estimate an equilibrium asset pricing model where a representative agent has recursive MPU. Their estimation results suggest that fear of ambiguity on the true probability law governing fundamentals carries WebThe present paper, then, presents the ﬁrst recursive model of intertemporal preferences that are ambiguity sensitive and dynamically consistent that does allow a separation of …

WebThis is because ambiguity about volatility leads invariably to a set of nonequivalent priors, that is, to priors that disagree about which scenarios are possible. Key words: ambiguity, recursive utility, G-Brownian motion, undomi- nated measures, quasisure analysis, robust stochastic volatility WebJul 2, 2024 · We analyze the impact of risk aversion and ambiguity aversion on the competing demands for annuities and bequeathable savings using a lifecycle recursive …

WebMar 8, 2024 · Both the mean and volatility of the growth rate of productivity are assumed to follow a Markov chain with an unobservable state. The agent’s preferences are characterized by the generalized recursive smooth ambiguity utility function.

WebFeb 1, 2015 · Recursive utility Stochastic differential utility Multiple priors Ambiguity aversion Continuous-time conditional mean model Martingale regression Time change … hunterborn cache markerWebAug 21, 2008 · Skiadas (2013c) argues that ambiguity aversion represented by certain types of smooth recursive utility disappears as the frequency increases, given Brownian or Poisson information. This section ... hunter boots youth size charthttp://people.stern.nyu.edu/dbackus/Exotic/1Ambiguity/EpsteinMiao%20JEDC%2003.pdf hunter boots youth size 4WebJun 25, 2024 · Jun 25, 2024, 16:05 ET. CHICAGO, June 25, 2024 /PRNewswire/ -- On March 10, 2024, it was announced that affiliates of the Corix Group of Companies, which … hunter borchardtWebOur generalized recursive smooth ambiguity model nests some popular models in theliteratureasspecialcases. • The subjective version of the recursive expected utility model of Kreps and Porteus (1978)andEpstein and Zin (1989) is obtained by setting v=uin (2). In this case, the two distributions μ st and π can be reduced to a one-step-ahead ... hunterborn and immersive weaponsWebAmbiguity in macro & finance . Recursive multiple priors, with Larry Epstein Journal of Economic Theory, 113(1), 32-50 (2003) Axiomatizes dynamically consistent model of … hunterborn 2 knivesWebIn addition to models with smooth ambiguity, we also estimate two baseline models with Epstein and Zin (1989)’s recursive utility for model comparison. The rst baseline model is the long-run risk model studied by Bansal, Kiku, and Yaron (2012), which is an improved formulation of the original model of Bansal and Yaron (2004). hunterborn caco