The Effect of Prudence on the Optimal Allocation in Possibilistic and Mixed Models

Irina Georgescu

Mathematics, 2018, vol. 6, issue 8, 1-19

Abstract: In this paper, several portfolio choice models are studied: a purely possibilistic model in which the return of the risky is a fuzzy number, and four models in which the background risk appears in addition to the investment risk. In these four models, risk is a bidimensional vector whose components are random variables or fuzzy numbers. Approximate formulas of the optimal allocation are obtained for all models, expressed in terms of some probabilistic or possibilistic moments, depending on the indicators of the investor preferences (risk aversion, prudence).

Keywords: prudence; optimal allocation; possibilistic moments (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2018
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Working Paper: The effect of prudence on the optimal allocation in possibilistic and mixed models (2018)
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