Monte Carlo simulation of macroeconomic risk with a continuum of agents: the symmetric case

Peter Hammond and Yeneng Sun ()

Economic Theory, 2003, vol. 21, issue 2, 743-766

Abstract: Suppose a large economy with individual risk is modeled by a continuum of pairwise exchangeable random variables (i.i.d., in particular). Then the relevant stochastic process is jointly measurable only in degenerate cases. Yet in Monte Carlo simulation, the average of a large finite draw of the random variables converges almost surely. Several necessary and sufficient conditions for such “Monte Carlo convergence” are given. Also, conditioned on the associated Monte Carlo -algebra, which represents macroeconomic risk, individual agents' random shocks are independent. Furthermore, a converse to one version of the classical law of large numbers is proved. Copyright Springer-Verlag Berlin Heidelberg 2003

Keywords: Keywords and Phrases: Large economy; Continuum of agents; Law of large numbers; Exchangeability; Joint measurability problem; de Finetti's theorem; Monte Carlo convergence; Monte Carlo $\sigma$-algebra.; JEL Classification Numbers: D80; C00; E00. (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (17)

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Working Paper: Monte Carlo Simulation of Macroeconomic Risk with a Continuum of Agents: The Symmetric Case (2001)
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DOI: 10.1007/s00199-002-0302-y

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