Dynamically consistent alpha‐maxmin expected utility
针对alpha-最大最小模型在动态决策中的不一致问题，提出递归的动态一致版本，并在连续时间极限下将效用表示为局部最优与最差的凸组合，推导了消费资本资产定价公式及其在衍生品定价中的应用。
Abstract The alpha‐maxmin model is a prominent example of preferences under Knightian uncertainty as it allows to distinguish ambiguity and ambiguity attitude. These preferences are dynamically inconsistent for nontrivial versions of alpha. In this paper, we derive a recursive, dynamically consistent version of the alpha‐maxmin model. In the continuous‐time limit, the resulting dynamic utility function can be represented as a convex mixture between worst and best case, but now at the local, infinitesimal level. We study the properties of the utility function and provide an Arrow–Pratt approximation of the static and dynamic certainty equivalent. We then derive a consumption‐based capital asset pricing formula and study the implications for derivative valuation under indifference pricing.