Portfolio models

This page describes the changes and additions that are necessary to handle portfolio allocation problems in Dynare.

Preprocessor

To flag the portfolio equation in the modfile

[key=value,key=value,...];

To trigger third order derivatives

Portfolios computations involve third order derivative when finding the steady state even if no simulation is to be made.

Currently, the preprocessor computes third derivatives ( g3 ) if order=3 option is passed to stoch_simul and the processing in matlab fails.

stoch_simul may eventually be modfied in order to allow for simulations with portfolios. In this case, it would not be the same as the so-called "third-order" approximation. For this reason, there should be another option somewhere triggering computations of g3

* One proposition : add an option to steady : (portfolios=true) which would imply (order=3)

* Another (cleaner) : differentiate runtime option order=... from preprocessing time option compute_order=...

* Currently : there is a patch that allows instruction steady(order=3) even if no stoch_simul instruction is present.

Initialize {{{g3}}}

Currently, g3 is computed by :

It is very time consuming.

Another method consists in defining a vector with non zero-content, then to expand it to a sparse matrix :

There is a patch and a test for it waiting for review.