| Title: | Discretization of AR(1) Processes |
|---|---|
| Description: | Discretize AR(1) process following Tauchen (1986) <http://www.sciencedirect.com/science/article/pii/0165176586901680>. A discrete Markov chain that approximates in the sense of weak convergence a continuous-valued univariate Autoregressive process of first order is generated. It is a popular method used in economics and in finance. |
| Authors: | David Zarruk Valencia & Rodrigo Azuero Melo |
| Maintainer: | David Zarruk Valencia <[email protected]> |
| License: | GPL (>= 2) |
| Version: | 1.0 |
| Built: | 2024-10-31 22:08:59 UTC |
| Source: | https://github.com/davidzarruk/rtauchen |
This function generates a matrix of transition probabilites of a finite-state Markov chain that mimics an AR(1) process with persistence parameter llamda, standard deviation ssigma and a fixed parameter m.
Rtauchen(ne, ssigma_eps, llambda_eps, m)Rtauchen(ne, ssigma_eps, llambda_eps, m)
ne |
Number of points of the grid of the finite-state Markov chain that mimics the AR(1) process |
ssigma_eps |
Standard deviation of exogenous shock in the AR(1) process |
llambda_eps |
Persistence parameter of the AR(1) process |
m |
Tauchen parameter for the width of the process (number of standard deviations of the AR(1) process covered by the grid) |
See Tauchen (1986) for details.
A matrix with the corresponding to the transition matrix of the finite-state Markov chain that approximates the AR(1) process
results = Rtauchen(2, 1.0e-5, 0.1,0.4) resultsresults = Rtauchen(2, 1.0e-5, 0.1,0.4) results
This function generates a grid of a finite-state Markov chain that mimics an AR(1) process with persistence parameter llamda, standard deviation ssigma and a fixed parameter m.
Tgrid(ne, ssigma_eps, llambda_eps, m)Tgrid(ne, ssigma_eps, llambda_eps, m)
ne |
Number of points of the grid of the finite-state Markov chain that mimics the AR(1) process |
ssigma_eps |
Standard deviation of exogenous shock in the AR(1) process |
llambda_eps |
Persistence parameter of the AR(1) process |
m |
Tauchen parameter for the width of the process (number of standard deviations of the AR(1) process covered by the grid) |
See Tauchen (1986) for details.
An array with the grid points of a finite-state Markov chain which approximates the original AR(1) process.
results = Tgrid(5, 0.02, 0.98, 3)results = Tgrid(5, 0.02, 0.98, 3)