Week 10 Homework Feedback: Iusupova Farangizbegim

Overall Assessment

Grade: ✅ (Pass)

Correct submission. You successfully implemented the EGM method and provided a very clean, well-commented code structure.

Task-by-Task Check

Task 1: Quantifying Precautionary Savings

  1. Parameter & Grid Setup: ✅ Correct.
  2. Solution Method: ✅ EGM implemented correctly.
  3. Deterministic Case: ✅ Solved.
  4. Stochastic Case: ✅ Solved.
  5. Simulation: ✅ Simulation logic is correct.
  6. Comparison: ✅ Premium calculated.

Task 2: The Role of Risk Aversion

  1. Sigma Variation: ✅ Implemented.
  2. Solving Sigma Cases: ✅ Solved.
  3. Policy Plot: ✅ Plotted.
  4. Simulation Comparison: ✅ Calculated.
  5. Interpretation: ✅ Correct.

Technical Implementation

  • Code Quality: Your code is very readable and well-commented.
  • EGM Logic: Correct. You handled the inversion of the Euler equation and the resource constraint (using fzero) correctly.
  • Structure: Including the explanation in the comments is helpful.

Visual Output

  • The combined comparison figure is very effective.

Suggestions for Improvement

  1. Efficiency: The fzero approach inside the loop is the main bottleneck. For production functions like Cobb-Douglas, the resource constraint is monotonic, so you can invert it using interpolation on a pre-computed grid of resources.

Summary

11/11 tasks correct. Correct work.