Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty

Ferrari G, Li H, Riedel F (2020) Center for Mathematical Economics Working Papers; 641.
Bielefeld: Center for Mathematical Economics.

Diskussionspapier | Veröffentlicht | Englisch
 
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Abstract / Bemerkung
We study an intertemporal consumption and portfolio choice problem under Knightian uncertainty in which agent's preferences exhibit local intertemporal substitution. We also allow for market frictions in the sense that the pricing functional is nonlinear. We prove existence and uniqueness of the optimal consumption plan, and we derive a set of sufficient first-order conditions for optimality. With the help of a backward equation, we are able to determine the structure of optimal consumption plans. We obtain explicit solutions in a stationary setting in which the financial market has different risk premia for short and long positions.

MSC classification: 93E20, 91B42, 60H30, 65C30
Stichworte
Hindy-Huang-Kreps preferences; Knightian uncertainty; g-expectation; ambiguity aversion; singular stochastic control
Erscheinungsjahr
2020
Serientitel
Center for Mathematical Economics Working Papers
Band
641
Seite(n)
27
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2948952

Zitieren

Ferrari G, Li H, Riedel F. Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty. Center for Mathematical Economics Working Papers. Vol 641. Bielefeld: Center for Mathematical Economics; 2020.
Ferrari, G., Li, H., & Riedel, F. (2020). Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty (Center for Mathematical Economics Working Papers, 641). Bielefeld: Center for Mathematical Economics.
Ferrari, G., Li, H., and Riedel, F. (2020). Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty. Center for Mathematical Economics Working Papers, 641, Bielefeld: Center for Mathematical Economics.
Ferrari, G., Li, H., & Riedel, F., 2020. Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty, Center for Mathematical Economics Working Papers, no.641, Bielefeld: Center for Mathematical Economics.
G. Ferrari, H. Li, and F. Riedel, Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty, Center for Mathematical Economics Working Papers, vol. 641, Bielefeld: Center for Mathematical Economics, 2020.
Ferrari, G., Li, H., Riedel, F.: Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty. Center for Mathematical Economics Working Papers, 641. Center for Mathematical Economics, Bielefeld (2020).
Ferrari, Giorgio, Li, Hanwu, and Riedel, Frank. Optimal Consumption with Intertemporal Substitution under Knightian Uncertainty. Bielefeld: Center for Mathematical Economics, 2020. Center for Mathematical Economics Working Papers. 641.
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2020-11-23T13:47:18Z
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