The method of endogenous gridpoints in theory and practice

The method of endogenous gridpoints (ENDG) significantly speeds up the solution to dynamic stochastic optimization problems with continuous state and control variables by avoiding repeated computations of expected outcomes while searching for optimal policy functions. I provide an interpolation technique for non-rectilinear grids that allow ENDG to be used in n-dimensional problems in an intuitive and computationally efficient way: the acceleration of ENDG with non-linear grid interpolation is nearly constant in the density of the grid. Further, ENDG has only been shown by example and has never been formally characterized. Using a theoretical framework for dynamic stochastic optimization problems, I formalize the method of endogenous gridpoints and present conditions for the class of models for which it can be used.