Perturbation Methods for Risk-Sensitive Economies

Evan W. Anderson () and Lars Peter Hansen
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Evan W. Anderson: University of Chicago

Computing in Economics and Finance 1996 from Society for Computational Economics

Abstract: Risk-sensitive control problems are designed to exacerbate the response of decision rules to amount of uncertainty confronting the controllers. Alternatively, they can be thought of as providing an element of robustness to the decision rules. In economies populated by risk-sensitive agents, risk sensitivity is also reflected in the equilibrium security market prices. Our paper explores alternative algorithms for computing equilibrium quantities and prices for risk sensitive economies.

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