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…marks
- Fix Example 4 transition matrix, finite-horizon wealth claim, Inada
condition, and law of iterated values derivation
- Rewrite RecurCompetitive without globals; compute geometric sums by
the backward recursion S_t = I + M S_{t+1} (law of iterated values)
- Add asset_price method and price a Lucas tree in Example 2; show that
natural debt limits are prices of claims to endowment streams
- Demonstrate why finite-horizon economies need no borrowing limits
- Add concluding remarks reviewing what the overview promised
- Add three exercises with solutions and cross-links to related lectures
Co-Authored-By: Claude Opus 5 <noreply@anthropic.com>
…sis, add exercises - Fix term-premium description, which had the signs in low- and high-rate states reversed - Rewrite distorted-beliefs section in subjective shocks so the agent's short rate is the market rate; verify both models imply the same risk-neutral dynamics and correct the overstatement ratio - Add identification discussion, exact lognormal SDF volatility, shock distribution under Q, negative-rate probability, and Monte Carlo standard errors - Extend yield-curve horizon and correct factor-loading description - Add exercises on CRRA and the Hansen-Jagannathan bound, the expectations hypothesis regression, and relative entropy of Q vs P - Add bib entries: FamaBliss1987, CampbellShiller1991, CIR1985, Black1995 Co-Authored-By: Claude Opus 5 <noreply@anthropic.com>
…nces Review of ross_recovery, long_run_risk_operator and misspecified_recovery for mathematical correctness, coherence and cross-lecture consistency. ross_recovery: - Make the Perron eigenvector positivity test scale invariant; the old test was applied to scipy's unit-norm vector and failed spuriously from gamma = 12, close to the gamma = 10 used in the exercises - Plot the relative pricing kernel on a log axis; it spans a factor of 9e6, which made most curves invisible - Note that the large-gamma cases imply riskless rates of -18% and -78%, and that the middle-state rate matching rho is a knife-edge coincidence - Attribute bounded continuous-state recovery to Carr and Yu rather than to misspecified_recovery, correct s_i to log(S_i/S_0), state the E[R*] = R_f assumption, and fix the Mehra-Prescott attribution long_run_risk_operator: - Correct the Feller nonattainment condition to 2 xi_f xbar_f >= sigma_f^2; the growth twist rescales the mean-reversion speed and the long-run mean but leaves their product invariant - Say log jump multiplier where the code means log, and fix a Summary step that equated an operator with a multiplicative functional - Replace a misleading reference line in the jump eigenvalue figure - Deliver the promise that the two frontiers can differ, by computing them under stochastic volatility, and rewrite an exercise that duplicated a worked example in the body misspecified_recovery: - Rewrite the permanent shocks section, which did not demonstrate its claim: with a shock independent of the Markov state, recovery over that state is exact, and the martingale component is nondegenerate only on the filtration that reveals the shock. Adds a numerical check - Select the eigenfunction by the lecture's own ergodicity assumption rather than by smallest eigenvalue exponent - Add the consumption SDE and the centered-drift convention, and correct a comment about what the martingale component changes Across the three: add cross-references to long_run_risk_operator from both companions, with notes recording the symbol correspondence, plus grammar, heading case and whitespace fixes. Co-Authored-By: Claude Opus 5 (1M context) <noreply@anthropic.com>
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🔵 Needs a closer look
It is a large, multi-file change to executable lecture notebooks with many new code cells and specific numerical/figure claims that require a full 45–60 minute build to validate, which cannot be confirmed in this review environment.
Pull request overview
This PR is a large editorial and pedagogical revision by @thomassargent30 of five asset-pricing lectures in the QuantEcon Intermediate Quantitative Economics with Python series. The bulk is prose tightening (grammar, spelling, line rewrapping) and clarification, but it also includes a substantial rewrite of ge_arrow.md, several new worked exercises with executable solutions, new cross-lecture references tying the recovery/long-run-risk lectures together, and four new bibliography entries.
Changes:
- Rewrote
ge_arrow.md: streamlinedRecurCompetitive(renamedvalue_functionss→value_functions, time-indexed geometric sums, addedasset_price), fixed the example-4 transition matrix, added a QuantEcon header, concluding remarks, and three new exercises. - Added new exercises and numerical illustrations to
affine_risk_prices.md(Sharpe-ratio/CRRA, expectations-hypothesis regression, relative-entropy/Pinsker) and clarified the distorted-beliefs derivation; extended the one-factor yield curve to 200 quarters. - Enriched the recovery trio (
ross_recovery.md,misspecified_recovery.md,long_run_risk_operator.md) with tighter prose, a scale-invariant Perron-eigenvector test, a principled root-selection rule insolve_pf_lrr, a permanent-shock example, and reciprocal cross-references; added four citations toquant-econ.bib.
File summaries
| File | Description |
|---|---|
lectures/ge_arrow.md |
Major rewrite of exposition and RecurCompetitive class; fixed example-4 row-sum bug; added header, summary, and three exercises. |
lectures/affine_risk_prices.md |
New exercises/solutions and numerical illustrations; clearer distorted-beliefs derivation; longer maturity grid; extra imports. |
lectures/ross_recovery.md |
Prose clarifications, scale-invariant eigenvector positivity test, added see-also/cross-references and notation notes. |
lectures/misspecified_recovery.md |
Prose edits, new permanent-shock code example, principled eigenfunction selection, added cross-references to the operator lecture. |
lectures/long_run_risk_operator.md |
Spelling/clarity edits, new "two frontiers" and jump-benchmark code cells, rewritten lrr_ex2 persistence-wedge exercise. |
lectures/_static/quant-econ.bib |
Added FamaBliss1987, CampbellShiller1991, CIR1985, Black1995 entries (all cited in affine_risk_prices.md). |
Review details
- Files reviewed: 6/6 changed files
- Comments generated: 0
- Review effort level: Balanced
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this PR contains a wide array of edits by @thomassargent30