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* Class 14 (30/5): Tracking distributions. Verification theorems. * Class 15 (5/6): 
* Class 14 (30/5): Tracking distributions. * Class 15 (5/6): Verification theorems. Application: principalagent in CT  Sannikov (2008). 
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* [[attachment:sl_absorption.pdfTracking absorption]] * [[attachment:sl_verification.pdfA simple verification theorem]] 

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* [[attachment:sl_absorption.pdfTracking absorption]] 
Dynamic Methods for Economics and Finance
Professor: Leandro Gorno (<leandro.gorno AT fgv DOT br>)
Lectures: Wednesdays 10:3012:30, Thursdays 1113.
 Office hours: by appointment.
News
 30May2019: New hints added for Exercise 2, changes in Exercise 4, and new hint in Exercise 5. The deadline has been extended to Monday June 3rd at 11:00AM.
 29May2019: New hint added for Exercise 2 in the exam (updated link below).
28May2019: The exam is online here.
 17Apr2019: As discussed last week, class today will start at 10:30am.
Class schedule (tentative)
 Class 1:(10/4) Course presentation, dynamic programming in discrete time.
 Class 2:(11/4) Linearization, dynamic programming in continuous time.
 Class 3 (17/4): More dynamic programming in continuous time. Mathematica basics.
 Class 4 (24/4): Poisson shocks. More Mathematica.
 Class 5 (25/4): More Poisson shocks. Introduction to stochastic calculus.
 Class 6 (2/5): More stochastic calculus. Writing HJBs. Applications.
 Class 7 (8/5): Geometric BM. Solving a SDE. Pricing simple FX contracts.
 Class 8 (9/5): ODEs and PDEs in Mathematica.
 Class 9 (15/5): More on meshes, FEM, and boundary value problems. Optimal stopping.
 Class 10 (16/5): More optimal stopping. Smoothness, noise, and vanishing viscosity.
 Class 11 (22/5): More on smoothness and optimal switching.
 Class 12 (23/5): Even more on smoothness. Adding jumps. Intro to Kolmogorov forward equations.
 Class 13(29/5): Random walk approximation to BM.
 Class 14 (30/5): Tracking distributions.
 Class 15 (5/6): Verification theorems. Application: principalagent in CT  Sannikov (2008).
 Class 16 (6/6):
 Class 17: (12/6):
 Class 18: (13/6):
Syllabus
Slides
Additional material
Additional material
Mathematica notebooks
A crash course in Mathematica. Preliminary. Last update: April 17th 2019.
References
Primary: Dixit, A.K. and Pindyck R.S. "Inverstment under uncertainty", Princeton University Press (1994)
Secondary: Harrison, J.M. "Brownian Models of Performance and Control" Link to Stanford GSB page (Note: this book is a new edition of the older classic "Brownian Motion and Stochastic Flow Systems" (1985) Link to Google books, which used to be online)
Pham, H. "Continuoustime Stochastic Control and Optimization with Financial Applications" Link to Springer
Cvitanic, J. and Zhang, J. "Contract Theory in ContinuousTime Models" Link to Springer
Related papers:
Optimal Unemployment Insurance Hopenhayn and Nicolini (JPE 1997)
Toward a Theory of Discounted Repeated Games with Imperfect Monitoring Abreu, Pearce and Stachetti (ECMA 1990)
Aggregation and Linearity in the Provision of Intertemporal Incentives Holmstrom and Milgrom (ECMA 1987)
A ContinuousTime Version of the Principal: Agent Problem Sannikov (Restud 2008)
Games with Imperfectly Observable Actions in Continuous Time Sannikov (ECMA 2007)
Competitive Real Options under Private Information Gorno and Iachan (working paper)