Comparison of conditional distributions in portfolios of dependent risks

Miguel A. Sordo, Alfonso Suárez-Llorens and Alfonso J. Bello

Insurance: Mathematics and Economics, 2015, vol. 61, issue C, 62-69

Abstract: Given a portfolio of risks, we study the marginal behavior of the ith risk under an adverse event, such as an unusually large loss in the portfolio or, in the case of a portfolio with a positive dependence structure, to an unusually large loss for another risk. By considering some particular conditional risk distributions, we formalize, in several ways, the intuition that the ith component of the portfolio is riskier when it is part of a positive dependent random vector than when it is considered alone. We also study, given two random vectors with a fixed dependence structure, the circumstances under which the existence of some stochastic orderings among their marginals implies an ordering among the corresponding conditional risk distributions.

Keywords: Dependence; Conditional distribution; Comonotonic vectors; Stochastic orders; Conditionally increasing; Distortion function; Distorted random variables (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:61:y:2015:i:c:p:62-69

DOI: 10.1016/j.insmatheco.2014.11.008

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