Risk matters: breaking certainty equivalence in linear approximations

DOI10.1016/J.JEDC.2021.104248zbMATH Open1478.91115OpenAlexW3204184022WikidataQ114161677 ScholiaQ114161677MaRDI QIDQ2054835FDOQ2054835

Authors: Juan Carlos Parra-Alvarez, Hamza Polattimur, Olaf Posch 

Publication date: 3 December 2021

Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.jedc.2021.104248

Recommendations

• Second-order approximation of dynamic models with time-varying risk
• Small noise methods for risk-sensitive/robust economies
• Accuracy of stochastic perturbation methods: The case of asset pricing models
• First Order Certainty Equivalence
• Asset prices in affine real business cycle models

zbMATH Keywords

perturbation methodscertainty equivalencepricing errors

Mathematics Subject Classification ID

Economic growth models (91B62)

Cites Work

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Cited In (6)

• Risk sensitive linear approximations
• Does near-rationality matter in first-order approximate solutions? A perturbation approach
• Linear approximations and tests of conditional pricing models
• Estimation of continuous-time linear DSGE models from discrete-time measurements
• Asset prices in affine real business cycle models
• Second-order approximation of dynamic models with time-varying risk

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