| Type: | Package |
| Title: | Discretization of AR(1) Processes |
| Version: | 1.0 |
| Date: | 2016-08-01 |
| Author: | David Zarruk Valencia & Rodrigo Azuero Melo |
| URL: | https://github.com/davidzarruk/Rtauchen |
| Maintainer: | David Zarruk Valencia <davidzarruk@gmail.com> |
| 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. |
| License: | GPL-2 | GPL-3 [expanded from: GPL (≥ 2)] |
| Imports: | stats |
| Packaged: | 2016-08-07 19:50:26 UTC; rodrigoazuero |
| NeedsCompilation: | no |
| Repository: | CRAN |
| Date/Publication: | 2016-08-07 22:02:19 |
Rtauchen
Description
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.
Usage
Rtauchen(ne, ssigma_eps, llambda_eps, m)
Arguments
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) |
Details
See Tauchen (1986) for details.
Value
A matrix with the corresponding to the transition matrix of the finite-state Markov chain that approximates the AR(1) process
Examples
results = Rtauchen(2, 1.0e-5, 0.1,0.4)
results
Tgrid
Description
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.
Usage
Tgrid(ne, ssigma_eps, llambda_eps, m)
Arguments
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) |
Details
See Tauchen (1986) for details.
Value
An array with the grid points of a finite-state Markov chain which approximates the original AR(1) process.
Examples
results = Tgrid(5, 0.02, 0.98, 3)