diff --git a/doc/dynare.texi b/doc/dynare.texi
index cf9ac6c9c..c8c8d3bee 100644
--- a/doc/dynare.texi
+++ b/doc/dynare.texi
@@ -4824,7 +4824,15 @@ discretion
 
 @optionshead
 
-This command accepts the same options than @code{ramsey_policy}.
+This command accepts the same options than @code{ramsey_policy}, plus:
+
+@table @code
+
+@item discretionary_tol = @var{NON-NEGATIVE DOUBLE}
+Sets the tolerance level used to assess convergence of the solution
+algorithm. Default: @code{1e-7}.
+
+@end table
 
 @end deffn
 
diff --git a/matlab/discretionary_policy_1.m b/matlab/discretionary_policy_1.m
index 6ded6bb70..2541df0a7 100644
--- a/matlab/discretionary_policy_1.m
+++ b/matlab/discretionary_policy_1.m
@@ -109,7 +109,7 @@ B=jacobia_(:,nnz(iyv)+1:end);
 %%% MAIN ENGINE %%%
 qz_criterium = options_.qz_criterium;
 solve_maxit = options_.solve_maxit;
-discretion_tol = options_.discretion_tol;
+discretion_tol = options_.discretionary_tol;
 
 if ~isempty(Hold)
 	[H,G,info]=discretionary_policy_engine(Alag,A0,Alead,B,W,instr_id,beta,solve_maxit,discretion_tol,qz_criterium,Hold);
diff --git a/preprocessor/DynareBison.yy b/preprocessor/DynareBison.yy
index cc8bca995..d841ece1a 100644
--- a/preprocessor/DynareBison.yy
+++ b/preprocessor/DynareBison.yy
@@ -125,7 +125,7 @@ class ParsingDriver;
 %token RELATIVE_IRF REPLIC RPLOT SAVE_PARAMS_AND_STEADY_STATE PARAMETER_UNCERTAINTY
 %token SHOCKS SHOCK_DECOMPOSITION SIGMA_E SIMUL SIMUL_ALGO SIMUL_SEED SMOOTHER SQUARE_ROOT_SOLVER STACK_SOLVE_ALGO STEADY_STATE_MODEL SOLVE_ALGO
 %token STDERR STEADY STOCH_SIMUL SYLVESTER SYLVESTER_FIXED_POINT_TOL REGIMES REGIME
-%token TEX RAMSEY_POLICY PLANNER_DISCOUNT DISCRETIONARY_POLICY
+%token TEX RAMSEY_POLICY PLANNER_DISCOUNT DISCRETIONARY_POLICY DISCRETIONARY_TOL
 %token <string_val> TEX_NAME
 %token UNIFORM_PDF UNIT_ROOT_VARS USE_DLL USEAUTOCORR GSA_SAMPLE_FILE
 %token VALUES VAR VAREXO VAREXO_DET VAROBS PREDETERMINED_VARIABLES
@@ -1636,14 +1636,22 @@ ramsey_policy : RAMSEY_POLICY ';'
 
 discretionary_policy : DISCRETIONARY_POLICY ';'
                        { driver.discretionary_policy(); }
-                     | DISCRETIONARY_POLICY '(' ramsey_policy_options_list ')' ';'
+                     | DISCRETIONARY_POLICY '(' discretionary_policy_options_list ')' ';'
                        { driver.discretionary_policy(); }
                      | DISCRETIONARY_POLICY symbol_list ';'
                        { driver.discretionary_policy(); }
-                     | DISCRETIONARY_POLICY '(' ramsey_policy_options_list ')' symbol_list ';'
+                     | DISCRETIONARY_POLICY '(' discretionary_policy_options_list ')' symbol_list ';'
                        { driver.discretionary_policy(); }
                      ;
 
+discretionary_policy_options_list : discretionary_policy_options_list COMMA discretionary_policy_options
+                           | discretionary_policy_options
+                           ;
+
+discretionary_policy_options : ramsey_policy_options 
+                             | o_discretionary_tol;
+                             ;
+
 ramsey_policy_options_list : ramsey_policy_options_list COMMA ramsey_policy_options
                            | ramsey_policy_options
                            ;
@@ -2494,6 +2502,7 @@ o_regimes : REGIMES { driver.option_num("ms.regimes","1"); };
 o_regime : REGIME EQUAL INT_NUMBER { driver.option_num("ms.regime",$3); };
 o_data_obs_nbr : DATA_OBS_NBR EQUAL INT_NUMBER { driver.option_num("ms.forecast_data_obs",$3); };
 o_stop_on_error: STOP_ON_ERROR EQUAL INT_NUMBER { driver.option_num("steady.stop_on_eror",$3); };
+o_discretionary_tol: DISCRETIONARY_TOL EQUAL non_negative_number { driver.option_num("discretionary_tol",$3); };
 
 range : symbol ':' symbol
         {
diff --git a/preprocessor/DynareFlex.ll b/preprocessor/DynareFlex.ll
index 81c1a8d7c..e1b29878a 100644
--- a/preprocessor/DynareFlex.ll
+++ b/preprocessor/DynareFlex.ll
@@ -454,6 +454,7 @@ string eofbuff;
 <DYNARE_STATEMENT>growth_factor {return token::GROWTH_FACTOR;}
 <DYNARE_STATEMENT>cova_compute {return token::COVA_COMPUTE;}
 <DYNARE_STATEMENT>stop_on_error {return token::STOP_ON_ERROR;}
+<DYNARE_STATEMENT>discretionary_tol {return token::DISCRETIONARY_TOL;}
 
 <DYNARE_STATEMENT>[\$][^$]*[\$] {
   strtok(yytext+1, "$");