Solving Euler equations via two-stage nonparametric penalized splines
通过两阶段非参数惩罚样条求解欧拉方程
This study proposes a novel estimation-based approach to solving asset pricing models for both stationary and time-varying observations. Our method is robust to misspecification errors while inheriting a closed-form solution. By representing the Euler equation into a well-posed integral equation of the second kind, we propose a penalized two-stage nonparametric estimation method and establish its optimal convergence under mild conditions. With the merit of penalized splines,…