Weak comonotonicity

DOI10.1016/J.EJOR.2019.09.019zbMATH Open1431.91446arXiv1812.04827OpenAlexW4237409883MaRDI QIDQ2282525FDOQ2282525

Authors: Ruodu Wang, Ričardas Zitikis 

Publication date: 8 January 2020

Published in: European Journal of Operational Research (Search for Journal in Brave)

Abstract: The classical notion of comonotonicity has played a pivotal role when solving diverse problems in economics, finance, and insurance. In various practical problems, however, this notion of extreme positive dependence structure is overly restrictive and sometimes unrealistic. In the present paper, we put forward a notion of weak comonotonicity, which contains the classical notion of comonotonicity as a special case, and gives rise to necessary and sufficient conditions for a number of optimization problems, such as those arising in portfolio diversification, risk aggregation, and premium calculation. In particular, we show that a combination of weak comonotonicity and weak antimonotonicity with respect to some choices of measures is sufficient for the maximization of Value-at-Risk aggregation, and weak comonotonicity is necessary and sufficient for the Expected Shortfall aggregation. Finally, with the help of weak comonotonicity acting as an intermediate notion of dependence between the extreme cases of no dependence and strong comonotonicity, we give a natural solution to a risk-sharing problem.

Full work available at URL: https://arxiv.org/abs/1812.04827

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zbMATH Keywords

financecomonotonicityrisk aggregationconditional beta

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70)

Cites Work

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Cited In (5)

• Inf-convolution, optimal allocations, and model uncertainty for tail risk measures
• Risk measures induced by efficient insurance contracts
• Pairwise counter-monotonicity
• Applications of conditional comonotonicity to some optimization problems
• Some useful counterexamples regarding comonotonicity

Uses Software

• QRM
• CopulaModel

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