Changed how portfolio choice works. You now use a riskyasset. This better fits where toolkit is going in terms of other asset types. It is also a necessary first step to implementing a combination of risky asset along with another standard asset (say housing). All the examples have been updated to reflect this.
[Previously you used Case 3. Case three has been removed. Apologies for the inconvenience but the needed changes to codes are minor and it will very much be worthwhile in terms of enabling future improvements.]
Many thanks for your excellent toolkit, Robert! I am learning life-cycle models currently based on your lecture notes and your toolkit. I have learned a lot and am trying to build a model accommodating housing. Buying and selling a house are definitely breaking changes (and discrete choices). The model is similar to Cocco (2005) and Yao and Zhang (2005). I think I need more states such as buying or selling a house and the size of the house as a house will provide both utility and investment return to a household. In another post “Replication: Cocco (2005)”, you mentioned it is possible to implement such a model with VFI toolkit. Would you kindly provide some guidance for coding? I plan to have minimal periods for feasibility. The following is a model I am thinking of. Thanks~
Sorry for the unclear notation. D^o =1 is owning a house, D^s is whether to sell the house conditional on D^o=1, B is safe asset, S is stock, delta is down payment share, tau can be ignored.
Decision variable (states) are S, H, D^o, D^s. (Total wealth after investing H and S can be B)
I’m creating a portfolio-choice with housing model example. Hopefully should be available next week. (I’ve written the code to implement this —having both a riskyasset and a standard endogenous state— just need to double-check it actually all does what I think it is doing.)
