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The effect of prudence on the optimal allocation in possibilistic and mixed models (1805.12066v1)
Published 15 May 2018 in q-fin.PM and cs.CE
Abstract: In this paper two portfolio choice models are studied: a purely possibilistic model, in which the return of a risky asset is a fuzzy number, and a mixed model in which a probabilistic background risk is added. For the two models an approximate formula of the optimal allocation is computed, with respect to the possibilistic moments associated with fuzzy numbers and the indicators of the investor risk preferences (risk aversion, prudence).
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