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The Method of Moderation for Solving Dynamic Stochastic Optimization Problems

Author

Listed:
  • Weifeng Wu

    (Johns Hopkins University)

  • Kiichi Tokuoka

    (International Monetary Fund)

  • Christopher Carroll

    (The Johns Hopkins University)

Abstract

We show that using a remapped version of the decision rule for a standard dynamic stochastic optimization problem, where the mapping is defined by asymptotic limits of the rule as uncertainty goes to zero, produces a solution that is both more robust (in the sense that a stable solution emerges across a wide range of parameter values with no 'tweaking' of the algorithm) and more efficient (in the sense that a rule of given accuracy can be represented with many fewer computations) than standard solution methods.

Suggested Citation

  • Weifeng Wu & Kiichi Tokuoka & Christopher Carroll, 2012. "The Method of Moderation for Solving Dynamic Stochastic Optimization Problems," 2012 Meeting Papers 1102, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:1102
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    References listed on IDEAS

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    Cited by:

    1. Zhechun He & Peter Simmons, 2018. "A Life Cycle Model with Housing Tenure, Constrained Mortgage Finance and a Risky Asset under Uncertainty," Discussion Papers 18/18, Department of Economics, University of York.

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