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Credibilistic risk aversion and prudence

Author

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  • Irina Georgescu
  • Jani Kinnunen

Abstract

Risk aversion and prudence are well-studied topics in probabilistic risk theory. This paper uses credibility theory of B. Liu and Y. Liu to approach these closely related concepts. The risk situations are modelled by fuzzy variables and the indicators of risk aversion and prudence are defined in the context of credibilistic expected utility theory. Approximate calculation formulas for these indicators are established and their properties are examined. The paper establishes relationships between credibilistic risk aversion and prudence, as well as, between credibilistic prudence and optimal precautionary saving.

Suggested Citation

  • Irina Georgescu & Jani Kinnunen, 2016. "Credibilistic risk aversion and prudence," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 11(1), pages 146-160.
    • Handle: RePEc:ids:ijbire:v:11:y:2016:i:1:p:146-160
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    Cited by:

    1. Georgescu Irina & Kinnunen Jani, 2019. "How the Investor’s Risk Preferences Influence the Optimal Allocation in a Credibilistic Portfolio Problem," Journal of Systems Science and Information, De Gruyter, vol. 7(4), pages 317-329, August.

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