Hi I think there is a mistake in the solution for this question. Please see 2nd paragraph 2nd bullet point on page 4 of ST6 Q&A Bank Part 3 - Solutions. I think the psi(t) should be equal to E(t-1) - phi(t)*S(t-1) so that psi(t) is previsible. I cannot see how the psi(t) given i.e. psi(t) = E(t) - phi(t)*S(t) is previsible (in a discrete setting). What do you think?
I think it is previsible because psi(t) and phi(t) refer to the period from t to t+1, so basically it is previsible because we determine at t what we must have at (t+1)
Q&a 3.3 Ruban, I agree with you and the version of the solution that's been prepared for the 2008 CMP says the same thing. This should be being added to the Corrections document on our website soon, but in the meantime, I attach the revised page 4 of the solutions file.
