Optimal Consumption and Portfolio Selection with Stochastic Differential Utility

@article{Schroder1999OptimalCA,
  title={Optimal Consumption and Portfolio Selection with Stochastic Differential Utility},
  author={Mark Schroder and Costis Skiadas},
  journal={Capital Markets eJournal},
  year={1999}
}
This paper develops the utility gradient (or martingale) approach for computing portfolio and consumption plans that maximize stochastic differential utility (SDU), a continuous-time version of recursive utility due to Duffie and Epstein (1992a). The setting is that of a general stochastic investment opportunity set with Brownian information (making some of the results novel in the time-additive case, as well). We characterize the first order conditions of optimality as a system of forward… 
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