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This paper discusses how to design, solve and estimate dynamic programming models using the open source package niqlow. Reasons are given for why such a package has not appeared earlier and why the object-oriented approach followed by niqlow seems essential. An example is followed that starts...
Persistent link: https://www.econbiz.de/10012243086
I introduce and evaluate a new stochastic simulation method for dynamic economic models. It is based on recent work in the operations research and engineering literatures (Van Roy et. al, 1997; Powell, 2007; Bertsekas, 2011). The baseline method involves rewriting the household's dynamic program in...
Persistent link: https://www.econbiz.de/10010202969
The computational time required to solve and estimate dynamic economic models is one of the main constraints in empirical research. The Endogenous Grid Method (EGM) proposed by Carroll (2006) is known to offer impressive speed gains over more traditional stochastic dynamic programming methods,...
Persistent link: https://www.econbiz.de/10014529535
We introduce a computational technique- precomputation of integrals - that makes it possible to construct conditional expectation functions in dynamic stochastic models in the initial stage of a solution procedure. This technique is very general: it works for a broad class of approximating...
Persistent link: https://www.econbiz.de/10011801654
In this contribution we propose a dynamic tracking error problem and we consider the problem of monitoring at discrete point the shortfall of the portfolio below a set of given reference levels of wealth. We formulate and solve the resulting dynamic optimization problem using stochastic...
Persistent link: https://www.econbiz.de/10014040374
In this contribution we propose an approach to solve a multistage stochastic programming problem which allows us to obtain a time and nodal decomposition of the original problem. This double decomposition is achieved applying a discrete time optimal control formulation to the original stochastic...
Persistent link: https://www.econbiz.de/10014041969
Economists who want to numerically approximate an elaborate dynamic stochastic programming problem (DSPP), either for structural estimation or policy evaluation purposes, are often confined by the curse of dimensionality: richer models with various state and control variables cannot be solved on...
Persistent link: https://www.econbiz.de/10014048078
We introduce the market resources method (MRM) for solving dynamic optimization problems. MRM extends Carroll's (2006) endogenous grid point method (EGM) for problems with more than one control variable using policy function iteration. The MRM algorithm is simple to implement and provides...
Persistent link: https://www.econbiz.de/10012968950
Portfolio optimization literature has come quite far in the decades since the first publication, and many modern models are formulated using second-order cone constraints and take discrete decisions into consideration. In this study, we consider both single-period and multi-period portfolio...
Persistent link: https://www.econbiz.de/10012903029
This chapter is concerned with numerical simulation of dynamic economic models. We focus on some basic algorithms and assess their accuracy and stability properties. This analysis is useful for an optimal implementation and testing of these procedures, as well as to evaluate their performance....
Persistent link: https://www.econbiz.de/10014024245