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Monte Carlo simulation of macroeconomic risk with a continuum of agents : the general case
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Hammond, Peter J. and Sun, Yeneng (2008) Monte Carlo simulation of macroeconomic risk with a continuum of agents : the general case. Economic Theory, Volume 36 (Number 2). pp. 303-325. doi:10.1007/s00199-007-0279-7 ISSN 0938-2259.
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Official URL: http://dx.doi.org/10.1007/s00199-007-0279-7
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 event-wise measurable conditional probabilities. These general characterizations also allow us to strengthen some earlier results related to exchangeability and independence.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HB Economic Theory Q Science > QA Mathematics |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Monte Carlo method, Convergence (Economics), Probabilities, Stochastic processes, Macroeconomics, Risk -- Mathematical models | ||||
Journal or Publication Title: | Economic Theory | ||||
Publisher: | Springer | ||||
ISSN: | 0938-2259 | ||||
Official Date: | August 2008 | ||||
Dates: |
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Volume: | Volume 36 | ||||
Number: | Number 2 | ||||
Number of Pages: | 23 | ||||
Page Range: | pp. 303-325 | ||||
DOI: | 10.1007/s00199-007-0279-7 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access | ||||
Version or Related Resource: | Hammond, P.J. and Sun, Y. (2007). Monte Carlo simulation of macroeconomic risk with a continuum agents: the general case. [Coventry] : University of Warwick, Economics Department. (Warwick economic research papers, no.803) http://wrap.warwick.ac.uk/id/eprint/1409 | ||||
Type of Event: | Conference | ||||
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