Small noise methods for risk-sensitive/robust economies
Lars Hansen and
Thomas Sargent ()
Journal of Economic Dynamics and Control, 2012, vol. 36, issue 4, 468-500
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.
Keywords: Computational economics; Recursive utility; Perturbation methods; Stochastic growth model (search for similar items in EconPapers)
JEL-codes: C63 D81 E20 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:4:p:468-500
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