Generalized stochastic differential utility and preference for information
This paper develops, in a Brownian information setting, an approach for analyzing the preference for information, a question that motivates the stochastic differential utility (SDU) due to Duffie and Epstein [Econometrica 60 (1992) 353-394]. For a class of backward stochastic differential equations (BSDEs) including the generalized SDU [Lazrak and Quenez Math. Oper. Res. 28 (2003) 154-180], we formulate the information neutrality property as an invariance principle when the filtration is coarser (or finer) and characterize it. We also provide concrete examples of heterogeneity in information that illustrate explicitly the nonneutrality property for some GSDUs. Our results suggest that, within the GSDUs class of intertemporal utilities, risk aversion or ambiguity aversion are inflexibly linked to the preference for information.
|Date of creation:||Mar 2005|
|Date of revision:|
|Publication status:||Published in Annals of Applied Probability 2004, Vol. 14, No. 4, 2149-2175|
|Contact details of provider:|| Web page: http://arxiv.org/|
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.:
- Frank Riedel, 2003.
"Dynamic Coherent Risk Measures,"
03004, Stanford University, Department of Economics.
- Zengjing Chen & Larry G. Epstein, 2000.
"Ambiguity, risk and asset returns in continuous time,"
RCER Working Papers
474, University of Rochester - Center for Economic Research (RCER).
- Zengjing Chen & Larry Epstein, 2002. "Ambiguity, Risk, and Asset Returns in Continuous Time," Econometrica, Econometric Society, vol. 70(4), pages 1403-1443, July.
- Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
- Chew, Soo Hong & Ho, Joanna L, 1994. "Hope: An Empirical Study of Attitude toward the Timing of Uncertainty Resolution," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 267-88, May.
- Simon Grant & Atsushi Kajii & Ben Polak, 1996.
"Preference for Information,"
Cowles Foundation Discussion Papers
1114, Cowles Foundation for Research in Economics, Yale University.
- Duffie, Darrell & Epstein, Larry G, 1992. "Stochastic Differential Utility," Econometrica, Econometric Society, vol. 60(2), pages 353-94, March.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:math/0503579. 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 references are entirely missing, you can add them using this form.