The interest rate for saving as a possibilistic risk
Abstract
In the paper there is studied an optimal saving model in which the interest-rate risk for saving is a fuzzy number. The total utility of consumption is defined by using a concept of possibilistic expected utility. A notion of possibilistic precautionary saving is introduced as a measure of the variation of optimal saving level when moving from a sure saving model to a possibilistic risk model. A first result establishes a necessary and sufficient condition that the presence of a possibilistic interest-rate risk generates an extra-saving. This result can be seen as a possibilistic version of a Rothschilld and Stiglitz theorem on a probabilistic model of saving. A second result of the paper studies the variation of the optimal saving level when moving from a probabilistic model (the interest-rate risk is a random variable) to a possibilistic model (the interest-rate risk is a fuzzy number).
Keywords
Cite
@article{arxiv.1908.00445,
title = {The interest rate for saving as a possibilistic risk},
author = {Irina Georgescu and Jani Kinnunen},
journal= {arXiv preprint arXiv:1908.00445},
year = {2020}
}