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period_length = 0.25;
P = 1 - exp(-.04*period_length); % disaster probability
% variable disaster size
B = -log(1 - [0.1384074;
0.2375926;
0.335;
0.4331111;
0.5516667;
0.653]);
% distribution of disaster size
probB = [0.6;
0.2;
0.088888889;
0.066666667;
0.022222222;
0.022222222];
meanB = B(:)'*probB;
Size = 1 - exp(-B(:)');
meanSize = Size*probB;
sdSize = sqrt((Size - meanSize).^2*probB(:));
G = 0.021*period_length; % drift of log output
RHO = 0.04*period_length; % time preference rate
NU = 0.02*period_length; % replacement rate
MU = 0.05; % popoulation share of agent 1
ALPHA = 1/3; % capital share in output
TAU = 0; % bond duration - start with short-term bonds
GAMMA1 = 1.000001; % start with unit risk aversion
GAMMA2 = GAMMA1;
delta_prob = 0.4; % default probability
delta_size = 0; % default size
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