Abstract

This paper studies mixed models of saving with three types of risks: labor income risk, interest rate risk, and background risk. Each risk can be probabilistically modeled by a random variable or possibilistically modeled by a fuzzy number. For each model a notion of precautionary saving is defined in order to measure the effect that various types of risk have on optimal saving. The main results establish necessary and sufficient conditions on consumer's prudence when risk parameters are introduced.

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