Dear colleagues,
On behalf of Walter Schachermayer, I would like to invite you to a talk of Walter's guest,
Prof. Philip Dybvig, Professor of Banking and Finance at Olin School of Business, Washington University, Saint Louis, USA
As announced today on our event site, http://www.fam.tuwien.ac.at/events/index.php Prof. Dybvig will be speaking about the following topic:
"High Hopes and Disappointments: Preference for Timing of Information without the Recursive Structure"
Abstract: Recursive Utility models generalize von Neumann-Morgenstern preferences by giving agents preference over the timing of resolution of uncertainty. These preferences have been given an axiomatic foundation by Kreps and Porteus [1978, 1979] and additional theoretical and empirical development by L. Seldon [1978], Epstein and Zin [1989, 1991], and others. We provide a generalization of these models which does not have the recursive structure. In recursive models, preferences looking forward do not depend on past consumption or beliefs. In our model, preferences looking forward also do not depend on past consumption, but they can depend on past beliefs, or perhaps more generally and more accurately on what was expected to happen on other branches of the tree. Preferences in our model are not defined recursively, which avoids the questions of existence that can be difficult in settings with continuousr time and/or an infinite horizon. We use our new model of preferences to derive optimal consumption and investment strategies, which can still be solved using dynamic programming but with an extra state variable.
Best regards, Tamara