Cookies?
Library Header Image
LSE Research Online LSE Library Services

Second-order approximation of dynamic models with time-varying risk

Benigno, Gianluca, Benigno, Pierpaolo and Nisticò, Salvatore (2013) Second-order approximation of dynamic models with time-varying risk. Journal of Economic Dynamics and Control, 37 (7). pp. 1231-1247. ISSN 0165-1889

Full text not available from this repository.

Abstract

This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic models in which the exogenous state variables follow conditionally linear stochastic processes displaying time-varying risk. The first-order approximation is consistent with a conditionally linear model in which risk is still time-varying but has no distinct role - separated from the primitive stochastic disturbances - in influencing the endogenous variables. The second-order approximation of the solution, instead, is sufficient to get this role. Moreover, risk premia, evaluated using only a first-order approximation of the solution, will be also time varying.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-econom...
Additional Information: © 2013 Elsevier B.V.
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C63 - Computational Techniques
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation
Sets: Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Funders: European Research Council
Date Deposited: 09 May 2013 15:55
URL: http://eprints.lse.ac.uk/49849/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only