Levental, Shlomo
[VerfasserIn]
;
Schroder, Mark D.
[Sonstige Person, Familie und Körperschaft];
Sinha, Sumit
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
In: Mathematical Finance, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 29, 2013 erstellt
Beschreibung:
We study a class of optimization problems involving linked recursive preferences in a continuous-time Brownian setting. Such links can arise when preferences depend directly on the level or volatility of wealth, in principal-agent (optimal compensation) problems with moral hazard, and when the impact of social influences on preferences is modeled via utility (and utility diffusion) externalities. We characterize the necessary first-order conditions, which are also sufficient under additional conditions ensuring concavity. We also examine applications to optimal consumption and portfolio choice, and applications to Pareto optimal allocations