Endogenous grids in higher dimensions: Delaunay interpolation and hybrid methods

Alexander Ludwig and Matthias Schön

No 72, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper investigates extensions of the method of endogenous gridpoints (ENDGM) introduced by Carroll (2006) to higher dimensions with more than one continuous endogenous state variable. We compare three different categories of algorithms: (i) the conventional method with exogenous grids (EXOGM), (ii) the pure method of endogenous gridpoints (ENDGM) and (iii) a hybrid method (HYBGM). ENDGM comes along with Delaunay interpolation on irregular grids. Comparison of methods is done by evaluating speed and accuracy by using a specific model with two endogenous state variables. We find that HYBGM and ENDGM both dominate EXOGM. In an infinite horizon model, ENDGM also always dominates HYBGM. In a finite horizon model, the choice between HYBGM and ENDGM depends on the number of gridpoints in each dimension. With less than 150 gridpoints in each dimension ENDGM is faster than HYBGM, and vice versa. For a standard choice of 25 to 50 gridpoints in each dimension, ENDGM is 1:4 to 1:7 times faster than HYBGM in the finite horizon version and 2:4 to 2:5 times faster in the infinite horizon version of the model.

Keywords: Dynamic Models; Numerical Solution; Method of Endogenous Grid-points; Delaunay Interpolation (search for similar items in EconPapers)
JEL-codes: C63 E21 (search for similar items in EconPapers)
Date: 2016, Revised 2016
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods (2018)
Working Paper: Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods (2014)
Working Paper: Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:72

DOI: 10.2139/ssrn.2515697

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