Small noise methods for risk-sensitive/robust economies

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

doi:10.1016/j.jedc.2011.11.007

Small noise methods for risk-sensitive/robust economies

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

Research output: Contribution to journal › Article › peer-review

Abstract

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 language	English (US)
Pages (from-to)	468-500
Number of pages	33
Journal	Journal of Economic Dynamics and Control
Volume	36
Issue number	4
DOIs	https://doi.org/10.1016/j.jedc.2011.11.007
State	Published - Apr 2012

Keywords

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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10.1016/j.jedc.2011.11.007

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abstract = "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.",

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author = "Anderson, {Evan W.} and Hansen, {Lars Peter} and Sargent, {Thomas J.}",

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AU - Hansen, Lars Peter

AU - Sargent, Thomas J.

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AB - 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.

KW - Computational economics

KW - Perturbation methods

KW - Recursive utility

KW - Stochastic growth model

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EP - 500

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

IS - 4

ER -

Small noise methods for risk-sensitive/robust economies

Abstract

Keywords

ASJC Scopus subject areas

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