Horizon-unbiased utility functions

STOCHASTIC PROCESSES AND THEIR APPLICATIONS

卷:117

Article; Proceedings Paper

Henderson, Vicky²  Hobson, David¹ 

[1] Univ Warwick, Dept Stat, Coventry CV4 7AL, W Midlands, England

[2] Univ Warwick, Warwick Business Sch, Coventry CV4 7AL, W Midlands, England

关键词: optimal stopping;    stochastic control;    utility maximisation;    real options;    incomplete market;    CRRA utility;    horizon-unbiased utility;    backward heat equation;   

DOI  :  10.1016/j.spa.2007.03.013

来源: Elsevier

【 摘 要 】

In this paper we consider a class of mixed optimal control/optimal stopping problems related to the choice of the best time to sell a single unit of an indivisible asset. We assume that in addition to the indivisible asset, the agent has access to a financial market. Investments in the financial market can be used for hedging, but the financial assets are only partially correlated with the indivisible asset, so that the agent faces an incomplete markets problem. We show how, even in the infinite horizon case, it is possible to express the problem as a maximisation problem with respect to an inter-temporal utility function evaluated at the sale time, but that this objective function must satisfy consistency conditions over time. (C) 2007 Elsevier B.V. All rights reserved.

【 授权许可】

Free