Advanced Search
MyIDEAS: Login to save this paper or follow this series

Ramsey Rule with Progressive utility and Long Term Affine Yields Curves

Contents:

Author Info

  • Nicole El Karoui

    (LPMA)

  • Mohamed Mrad

    (LAGA)

  • Caroline Hillairet

    (CMAP)

Registered author(s):

    Abstract

    The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such a long maturity modelization, the possibility of adjusting preferences to new economic information is crucial, justifying the use of progressive utility. This paper studies, in a framework with affine factors, the yield curve given from the Ramsey rule. It first characterizes consistent progressive utility of investment and consumption, given the optimal wealth and consumption processes. A special attention is paid to utilities associated with linear optimal processes with respect to their initial conditions, which is for example the case of power progressive utilities. Those utilities are the basis point to construct other progressive utilities generating non linear optimal processes but leading yet to still tractable computations. This is of particular interest to study the impact of initial wealth on yield curves.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://arxiv.org/pdf/1404.1913
    File Function: Latest version
    Download Restriction: no

    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1404.1913.

    as in new window
    Length:
    Date of creation: Apr 2014
    Date of revision:
    Handle: RePEc:arx:papers:1404.1913

    Contact details of provider:
    Web page: http://arxiv.org/

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Nicole El Karoui & Caroline Hillairet & Mohamed Mrad, 2014. "Ramsey Rule with Progressive Utility in Long Term Yield Curves Modeling," Papers 1404.1895, arXiv.org.
    2. GOLLIER Christian, 2008. "Expected net present value, expected net future value, and the Ramsey rule," LERNA Working Papers 08.29.273, LERNA, University of Toulouse.
    3. Jonathan E. Ingersoll Jr. & Philip H. Dybvig & Stephen A. Ross, 1998. "Long Forward and Zero-Coupon Rates Can Never Fall," Yale School of Management Working Papers ysm45, Yale School of Management.
    4. Gollier, Christian, 2009. "Should we Discount the Far-Distant Future at its Lowest Possible Rate?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(25), pages 1-14.
    5. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    6. N. El Karoui & Mohamed M'Rad, 2010. "Stochastic Utilities With a Given Optimal Portfolio : Approach by Stochastic Flows," Working Papers hal-00477380, HAL.
    7. David Bolder & Shudan Liu, 2007. "Examining Simple Joint Macroeconomic and Term-Structure Models: A Practitioner's Perspective," Working Papers 07-49, Bank of Canada.
    8. Nicole El Karoui & Caroline Hillairet & Mohamed Mrad, 2014. "Ramsey Rule with Progressive Utility in Long Term Yield Curves Modeling," Working Papers hal-00974815, HAL.
    9. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Nicole El Karoui & Caroline Hillairet & Mohamed Mrad, 2014. "Ramsey Rule with Progressive Utility in Long Term Yield Curves Modeling," Working Papers hal-00974815, HAL.
    2. Nicole El Karoui & Caroline Hillairet & Mohamed Mrad, 2014. "Ramsey Rule with Progressive Utility in Long Term Yield Curves Modeling," Papers 1404.1895, arXiv.org.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1404.1913. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.