Small noise methods for risk-sensitive/robust economies

Evan W. Anderson, Lars Peter Hansen, Thomas J. Sargent

    Research output: Contribution to journalArticlepeer-review


    We provide small noise expansions for the value function and decision rule for the recursive risk-sensitive preferences specified by Hansen and Sargent (1995), Hansen et al. (1999), and Tallarini (2000). We use the expansions (1) to provide a fast method for approximating solutions of dynamic stochastic problems and (2) to quantify the effects on decisions of uncertainty and concerns about robustness to misspecification.

    Original languageEnglish (US)
    Pages (from-to)468-500
    Number of pages33
    JournalJournal of Economic Dynamics and Control
    Issue number4
    StatePublished - Apr 2012


    • Computational economics
    • Perturbation methods
    • Recursive utility
    • Stochastic growth model

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Control and Optimization
    • Applied Mathematics


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