Take Action
Research Details
Robust Control and Recursive Utility, Finance and Stochastics
Abstract
This paper shows that a finite-horizon version of the robust control criterion appearing in recent papers by Hansen, Sargent, and their coauthors can be described as recursive utility, which in continuous time takes the form of the Stochastic Differential Utility (SDU) of Duffie and Epstein (1992). While it has previously been noted that Bellman equations arising in robust control settings are of the same form as Bellman equations arising from SDU maximization, here this connection is shown directly without reference to any underlying dynamics, or Markov structure.
Type
Article
Author(s)
Date Published
2003
Citations
Skiadas, Constantinos. 2003. Robust Control and Recursive Utility. Finance and Stochastics. 7(4): 475-489.
LINK