Intertemporal asset pricing and the marginal utility of wealth (Q553533)

The authors consider a general class of discrete-time, finite-horizon intertemporal asset pricing models. They supply a generalized definition of marginal utility of wealth based on the Frechet differential of the value operator that maps time wealth into maximum conditional remaining utility. It is shown that in this general case all state-price densities/stochastic discount factors are fully characterized by the marginal utility of wealth of optimizing agents even if their preferences for intermediate consumption are highly irregular. An example is given.