Construction of an aggregate consistent utility, without Pareto optimality. Application to Long-Term yield curve Modeling
Résumé
The aim of this paper is to describe globally the behavior and preferences of heterogeneous agents. Our starting point is the global wealth of the economy, with a given repartition of the wealth among investors, which is not necessarily Pareto optimal. We propose a construction of an aggregate forward utility, market consistent, that aggregates the marginal utility of the heterogeneous agents. This construction is based on the aggregation of the pricing kernels of each investor. As an application we analyze the impact of the heterogeneity and of the global wealth market on the yield curve.
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