Farmer, Leland E.; Akira Toda, Alexis - In: Quantitative economics : QE ; journal of the … 8 (2017) 2, pp. 651-683
Approximating stochastic processes by finite-state Markov chains is useful for reducing computational complexity when solving dynamic economic models. We provide a new method for accurately discretizing general Markov processes by matching low order moments of the conditional distributions using...