Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in a continuous time model. We consider the version of recursive utility which gives the most unambiguous separation of risk...

We derive the equilibrium interest rate and risk premiums using recursive utility with heterogeneity in a continuous time model. We solve the associated sup-convolution problem, and obtain explicit closed form solutions. The heterogeneous two-agent model is calibrated to the data of Mehra and...

We study a rational expectations' competitive equilibrium in a production economy, i.e., a system of prices at which firms' profit maximizing production decisions and individuals' preferred affordable consumption choices equate supply and demand in every market. We derive the equilibrium price...

Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in a continuous time model. Two ordinally equivalent versions are considered. The state price is not Markov in any of the versions,...

For the conventional model with additive and separable expected utility, risk aversion and intertemporal elasticity of substitution in consumption sometimes play conflicting roles, in particular in life insurance and pensions. We propose to use recursive utility in the life cycle model, where we...

Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in continuous time. In a representative-agent framework our model allows for the separation of risk aversion from the time...