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by KackToodles
August 29th, 2005, 10:37 pm
Forum: Technical Forum
Topic: exponential versus power-law utility functions
Replies: 3
Views: 137582

exponential versus power-law utility functions

<t>I agree that, if one wants to take the continuous time limit, the power-law utility is more tractible.However, it seems to me that in many cases the exponential utility is equally (or even more) tractibleif one wants to work in discrete time -- especially if one wants to assume cash flows are nor...
by KackToodles
August 29th, 2005, 6:59 pm
Forum: Technical Forum
Topic: exponential versus power-law utility functions
Replies: 3
Views: 137582

exponential versus power-law utility functions

For simple consumption-investment dynamic portfolio optimization problems in discrete time,most models seem to use power law (or CRRA) utility functions. Why not use exponential(CARA) utilities? What are the limitations of the exponential utility that drive people to the power law?Onyee
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