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Optimal Saving with Additive and Multiplicative Background Risk

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Artige, Lionel

We study optimal saving when incomes are certain and risk bears on consumption. A key finding is that, with CARA utility and additive uncertain consumption, or CRRA utility and multiplicative consumption, risk-averse individuals do not form precautionary saving as in the standard theory of saving under uncertainty.

Document type Document de travail (Working Paper)
Access type Accès libre
Publication date 2004
Collection ECON Working Papers - 2004/59
Affiliation UCL - ESPO/ECON - Département des sciences économiques
Keywords Consumption ; Risk-aversion ; Saving ; Uncertainty
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Bibliographic reference Artige, Lionel. Optimal Saving with Additive and Multiplicative Background Risk. ECON Working Papers ; 2004/59 (2004)
Permanent URL http://hdl.handle.net/2078.1/5839