Hi all,

I am reading the code replicating Arellano (2008) (https://lectures.quantecon.org/py/arellano.html#Computation)

This code uses value function iteration. I feel confused where did they set the initial value for the value function. I could not see the initial guess around the for loop of iteration.

They only do some kinds of allocating memory for value functions. This is on the part of def **init**(self, …), at the beginning of the code.

So I wonder, whether this is indeed the initial guess for value functions?, which set all value functions are zeros matrix?

# Allocate memory

```
self.Vd = np.zeros(ny)
self.Vc = np.zeros((ny, nB))
self.V = np.zeros((ny, nB))
self.Q = np.ones((ny, nB)) * .95 # Initial guess for prices
self.default_prob = np.empty((ny, nB))
```

And if they are the inital guess, can I put them inside the loop, rather than in the def__init(…)

so that I do not need to put self. before Vd, Vc,…?

Thank you,