Discretization

I have written several papers (Tanaka & Toda, 2013, 2015; Farmer & Toda, 2017; Toda, 2021) on discretizing probability distributions and stochastic processes.

I have compiled the discretization codes in a Matlab package that allows the user to:

• discretize a VAR(1) with Gaussian shocks,
• discretize an AR(p) process with Gaussian mixture shocks,
• discretize an AR(1) with log AR(1) stochastic volatility,
• discretize the Cox-Ingersoll-Ross model,
• calibrate a discrete distribution directly from data.

The package also contains a tutorial on how to write your own discretization codes. If you find any bugs or have other processes you would like discretized, please let me know by email.