Consumption-investment optimization with Epstein-Zin utility in incomplete markets

@article{Xing2017ConsumptioninvestmentOW,
  title={Consumption-investment optimization with Epstein-Zin utility in incomplete markets},
  author={Hao Xing},
  journal={Finance and Stochastics},
  year={2017},
  volume={21},
  pages={227-262}
}
In a market with stochastic investment opportunities, we study an optimal consumption investment problem for an agent with recursive utility of Epstein-Zin type. Focusing on the empirically relevant specification where both risk aversion and elasticity of intertemporal substitution are in excess of one, we characterize optimal consumption and investment strategies via backward stochastic differential equations. The supperdifferential of indirect utility is also obtained, meeting demands from… CONTINUE READING