Shock to a probability / approximation

[burgerino]

Shocks to bounded variables

Hi! I am trying to simulate a model in which I put a shock on a bounded variable (more precisely, this variable is a proba and thus bounded btw 0 and 1). Unless I consider small shock variances , the simulated variable is not bounded any more and the simulation generates errors. Considering ‘tricks’ like min, max or arctan in order to keep shocks bounded does not seem to help, because of the linearisation I think. I would like to know if it is possible to impose bounds on shocks or to simulate…