Predictable Forward Performance Processes: The Binomial Case

摘要: We introduce a new class of forward performance processes that are endogenous and predictable with regards to an underlying market information set and, furthermore, updated at discrete times. analyze in detail binomial model whose parameters random dynamically as the evolves. show key step construction associated process is solve single-period inverse investment problem, namely, determine, period-by-period conditionally on current information, end-time utility function from given initial-time value function. reduce this problem solving functional equation establish conditions for existence uniqueness its solutions marginal functions.