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Monte Carlo simulation of macroeconomic risk with a continuum agents: the general case
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Hammond, Peter J. and Sun, Yeneng (2007) Monte Carlo simulation of macroeconomic risk with a continuum agents: the general case. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.803).

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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
In large random economies with heterogeneous agents, a standard stochastic framework presumes a random macro state, combined with idiosyncratic micro shocks. This can be formally represented by a random process consisting of a continuum of random variables that are conditionally independent given the macro state. However, this process satisfies a standard joint measurability condition only if there is essentially no idiosyncratic risk at all. Based on iteratively complete product measure spaces, we characterize the validity of the standard stochastic framework via Monte Carlo simulation as well as eventwise measurable conditional probabilities. These general characterizations also allow us to strengthen some earlier results related to exchangeability and independence.
Item Type:  Working or Discussion Paper (Working Paper) 

Subjects:  H Social Sciences > HB Economic Theory Q Science > QA Mathematics 
Divisions:  Faculty of Social Sciences > Economics 
Library of Congress Subject Headings (LCSH):  Monte Carlo method, Convergence (Economics), Probabilities, Stochastic processes, Macroeconomics, Risk  Mathematical models 
Series Name:  Warwick economic research papers 
Publisher:  University of Warwick, Department of Economics 
Place of Publication:  Coventry 
Official Date:  June 2007 
Number:  No.803 
Number of Pages:  29 
Status:  Not Peer Reviewed 
Access rights to Published version:  Open Access 
Realised As:  Hammond, P.J. and Sun, Y. (2008). Monte Carlo simulation of macroeconomic risk with a continuum of agents: the general case. Economic Theory, 36(2), pp. 303325. http://wrap.warwick.ac.uk/id/eprint/29996 
Related URLs:  
References:  [1] P. Billingsley, Probability and Measure, (3rd. edn.), John Wiley, New York, 1995. 
URI:  http://wrap.warwick.ac.uk/id/eprint/1409 
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