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    Solving incomplete markets models by derivative aggregation

    Grasl, Tobias (2013) Solving incomplete markets models by derivative aggregation. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    This article presents a novel computational approach to solving models with both uninsurable idiosyncratic and aggregate risk that uses projection methods, simulation and perturbation. The approach is shown to be both as efficient and as accurate as existing methods on a model based on Krusell and Smith (1998), for which prior solutions exist. The approach has the advantage of extending straightforwardly, and with reasonable computational cost, to models with a greater range of diversity between agents, which is demonstrated by solving both a model with heterogeneity in discount-rates and a lifecycle model with incomplete markets.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): Idiosyncratic Risk, Business Cycles, Numerical Methods
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 30 Apr 2013 11:07
    Last Modified: 11 Oct 2016 15:27
    URI: http://eprints.bbk.ac.uk/id/eprint/6531

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