Exogenous shock and vfoptions.lowmemory

robertdkirkby · July 21, 2026, 10:12pm

I have added to ./docs/ a file that spells out exogenous shocks and how vfoptions.lowmemory works for each kind of shocks.

It is more to help AI than for humans to read. The toolkit is not yet entirely compliant with the rules this spells out for vfoptions.lowmemory, but I plan to bring it into compliance over time.

github.com/vfitoolkit/VFIToolkit-matlab

docs/ExogenousShocks.md

master

# Exogenous Shocks

The VFI Toolkit supports three kinds of exogenous shock. This document describes how to set each one up, how to combine them, and the `lowmemory` options that the combination determines.

| Type | Persistence | Enters `Policy`? | Transition input |
|------|-------------|------------------|------------------|
| **z** (markov) | persistent | yes | `pi_z` (Markov matrix) |
| **e** (iid) | iid, *within-period* | yes | `pi_e` (distribution) |
| **semiz** (semi-exogenous) | persistent, **decision-dependent** | yes | `SemiExoStateFn` → `pi_semiz` |

All three are "start-of-period" states that the agent sees before choosing, so `Policy` depends on them.

> **Not to be confused with `u`.** The between-period iid shock `u` used by `riskyasset` / `experienceassetu` is *not* one of these. `u` is realised *after* the decision (it perturbs next period's asset via `aprimeFn(d,...,u)`), so `Policy` does **not** depend on `u`; it is integrated out by `pi_u`. See the riskyasset / experienceassetu command docs.

---

## z — markov shock

A persistent shock with a Markov transition matrix. You provide `n_z`, `z_grid`, and `pi_z`. To have no markov shock, set `n_z=0` and pass `z_grid=[]`, `pi_z=[]`. For what the age index `j` means in age-dependent inputs, see [Timing](#timing).

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robertdkirkby · July 25, 2026, 4:52am

Turns out there where 219 non-compliant value fn iteration commands. Got it down to about 120 this week. Hopefully can finish them up and get full compliance with these ‘rules’ for how vfoptions.lowmemory works next week.

robertdkirkby · July 30, 2026, 4:36am

Down to 60-ish, essentially all of which relate to Quasi-Hyperbolic discounting. Will hopefully complete them next week.

robertdkirkby · August 5, 2026, 4:02am

VFI Toolkit is now fully compliant with the low-memory rules laid out in ./docs/ExogenousShocks.md

robertdkirkby · August 10, 2026, 9:26am

./docs/ExogenousShocks now also covers the precise timing conventions when using exogenous shocks. All the discretize shock commands already followed these conventions, I have now updated the toolkit to 100% compliance with these timing conventions (a few parts of the toolkit were off by one period in the i.i.d. shocks, most of the rest was already compliant).