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