Investment under Risk with Discrete and Continuous Assets

Chris Elbers, Jan Willem Gunning and Melinda Vigh
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Melinda Vigh: VU University Amsterdam

No 09-054/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper considers a general class of stochastic dynamic choice models with discrete and continuous decision variables. This class contains a variety of models that are useful for modeling intertemporal household decisions under risk. Our examples are drawn from the field of development economics. We formalize this class as a dynamic programming problem, then propose a solution method that relies on value function iteration. Finally, in an example we show how our algorithm can be applied to solve and estimate a dynamic model with discrete and continuous controls.

Keywords: value function iteration; mixed continuous/discrete controls; stochastic dynamic choice model (search for similar items in EconPapers)
JEL-codes: C51 C61 C63 E12 G11 Q12 (search for similar items in EconPapers)
Date: 2009-06-16
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20090054

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