Continuous vs. discrete time: Some computational insights

Autor:	Pontus Rendahl
Rok vydání:	2022
Předmět:	Economics and Econometrics Control and Optimization Implicit method Howard's improvement algorithm Applied Mathematics Computation
Zdroj:	Journal of Economic Dynamics and Control. 144:104522
ISSN:	0165-1889
DOI:	10.1016/j.jedc.2022.104522
Popis:	Solving a workhorse incomplete markets model in continuous time is many times faster compared to its discrete time counterpart. This paper dissects the computational discrepancies and identifies the key bottlenecks. The implicit finite difference method – a commonly used tool in continuous time – accounts for a large share of the difference. This method is shown to be a special case of Howard’s improvement algorithm, efficiently implemented by relying on sparse matrix operations. By representing the policy function with a transition matrix it is possible to formulate a similar procedure in discrete time, which effectively eliminates the differences in run-times entirely.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::b2ff1a4074c559c922be0e984487882e https://doi.org/10.1016/j.jedc.2022.104522 Zobrazit plný text záznamu Full Text from ScienceDirect