Smooth Ambiguity Aversion Toward Small Risks and Continuous-Time Recursive Utility

@inproceedings{Skiadas2008SmoothAA,
  title={Smooth Ambiguity Aversion Toward Small Risks and Continuous-Time Recursive Utility},
  author={Costis Skiadas},
  year={2008}
}
In a continuous-time setting with Brownian and Poissonian uncertainty, this paper formulates recursive utility under two smooth certainty equivalent (CE) types that have been proposed as representations of ambiguity aversion. For a smooth CE based on the formulation of Klibano¤, Marinacci, and Mukerji (Econometrica, 2005), it is argued that the corresponding continuous-time recursive utility reduces to Kreps-Porteus utility (Econometrica, 1978), that is, recursive utility with an expected… CONTINUE READING
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