Abstract: Modern asset pricing models combine recursive preferences with complex dynamics for the underlying consumption process. Existence of solutions is, for many of these models, an unsettled question. This paper introduces a novel technique to prove existence and non-existence for models with recursive preferences. The approach applies to many models of interest, such as those with long-run consumption risks, with stochastic volatility and jumps, with volatility of volatility, with time-varying consumption disasters, and with smooth ambiguity aversion and learning. Collectively the proven results settle the existence question for many of today's leading asset pricing models.
Publication Year: 2019
Publication Date: 2019-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 1
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