Alternative methods of solving state-dependent pricing models

We use simulation-based techniques to compare and contrast two methods for solving state-dependent pricing models: discretization, which solves and simulates the model on a grid; and collocation, which relies on Chebyshev polynomials. While both methods produce qualitatively similar results, statistically significant quantitative differences do arise. We present evidence favoring discretization over collocation in this context, given a lack of robustness in the latter.

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Year of publication:	2008
Authors:	II, Edward S. Knotek ; Terry, Stephen
Institutions:	Federal Reserve Bank of Kansas City

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Extent:	application/pdf
Series:	Research Working Paper.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number RWP 08-10
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005515044