June 20 to July 18, 2024
Abstract:
This intensive online summer school brings students to the frontier of modern continuous time modeling techniques at the intersection between macroeconomics, monetary economics, and (international) finance. The aim of this course is to develop and teach advanced tools and includes a step-by-step solution procedure that students can apply to a variety of economic problems.
Target Audience:
The course is designed for Ph.D students in economics, finance, and related fields. The course is suitable for first year PhD students.
Participating students must be nominated by their Ph.D. advisor. We are now taking nominations—email jessicab@princeton.edu.
Background Readings:
- Macrofinance and Resilience
- Macroeconomics with Financial Frictions
- The Economics of Inaction by Nancy Stokey (Chapters 2 and 3 for basics in stochastic calculus)
Flipped classroom setting:
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- Students watch online lectures at their preferred time.
- Review sessions are held simultaneously for all participants. We will determine the timing by vote after the opening meeting
- Participating students are expected to solve and submit problem sets. They are also allowed to do it in small groups.
Awards:
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- Students who perform well on problem sets are eligible to attend the Princeton Initiative 2024 in Princeton from September 6-8.
- Receive a certificate of participation from Markus[1]
Outline, Timing and Links:
- Opening Zoom Meeting – Thursday, June 20 (1:00 pm Eastern Standard Time; 19:00 European Time)
1. Continuous Time Modeling Without Diffusion Risk (Kiyotaki and Moore)
- 01slides
- 01video
- Problem Sets: Continuous Time Kiyotaki-Moore with Investment
- Matlab file
- Review Session: TBA
2. Continuous Time Stochastic Optimization (Consumption, Portfolio)
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- 02slides
- 02video
- Problem Set on Portfolio Choice
Upload your answer here - Review Session: TBA
3. Endogenous Risk Dynamics with Log utility
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- 04slides
- 04video
- Problem Set on Fire Sales
Upload your answer here - Review Session
4. Contrasting Financial Frictions
- 05slides
- 05video
- Problem Set on Contrasting Friction
- Matlab file
- Review Session: TBA
5. Monetary Models with One Sector
6. Different Monetary Theories
7. Numerical Methods and Value Function Iteration
Videos by Yuliy Sannikov
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- Introduction: General Class of Equations
- Example: Valuation Equation and HJB
- Forward and Backward Equations: HJB, KFE
- Finite Difference Schemes: Key Principles
- Finite Difference Operator and sign of Matrix
- Explicit Scheme
- Implicit Scheme
- Stationary Value Function in a Single Step
- KFE using Matrix M
- General Class of HJB in One Dimension
- Solving HJB
Videos by Andrey Alexandrov
[1] This is not an official degree from Princeton University