The purpose of this assignment is to stretch the notions of the concepts used in population models by considering the dynamics of a financial system. Think of some population of funds (e.g., bank account, corporation, government budget) that could reasonably be modeled using a simple linear difference equation. Describe your scenario including assumptions that need to be made for the model to be valid. Then choose two of the potential generalizations discussed in class to consider for extensions to your model.

The generalizations we have mentioned are: structured models (matrix models), density dependent growth (nonlinear), delay difference equations (second order), and uncertainty (stochastic). Discuss in particular the aspects of your original assumptions that lead to significant deficiencies in your model but can be addressed by one of these generalizations. You do not need to express the resulting general model; think of this as a proposal for next steps that one could investigate to improve the simple linear model.

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