Risk aversion, prudence and mixed optimal saving models

How Changing Prudence and Risk Aversion Affect Optimal Saving

We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk aversion that affect the distribu...

How Changing Prudence and Risk Aversion Affect Optimal Saving

We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk aversion that affect the distribu...

Connecting possibilistic prudence and optimal saving

— In this paper we study the optimal saving problem in the framework of possibility theory. The notion of possibilistic precautionary saving is introduced as a measure of the way the presence of possibilistic risk (represented by a fuzzy number) influences a consumer in establishing the level of optimal saving. The notion of prudence of an agent in the face of possibilistic risk is defined and ...

Relationships between Risk Aversion , Prudence , and Cautiousness

In this paper we investigate the relationships between prudence, risk aversion, and cautiousness. These three measures explain investors’ investment decisions in the money market, stock market, and option market respectively. Thus to understand how investors’ investment decisions in the three markets are related it is important to know the relationships between the three measures. We show that ...

Joint measurement of risk aversion , prudence and temperance