On the invariant properties of notions of positive dependence and copulas under increasing transformations

Jun Cai and Wei Wei

Insurance: Mathematics and Economics, 2012, vol. 50, issue 1, 43-49

Abstract: Notions of positive dependence and copulas play important roles in modeling dependent risks. The invariant properties of notions of positive dependence and copulas under increasing transformations are often used in the studies of economics, finance, insurance and many other fields. In this paper, we examine the notions of the conditionally increasing (CI), the conditionally increasing in sequence (CIS), the positive dependence through the stochastic ordering (PDS), and the positive dependence through the upper orthant ordering (PDUO). We first use counterexamples to show that the statements in Theorem 3.10.19 of Müller and Stoyan (2002) about the invariant properties of CIS and CI under increasing transformations are not true. We then prove that the invariant properties of CIS and CI hold under strictly increasing transformations. Furthermore, we give rigorous proofs for the invariant properties of PDS and PDUO under increasing transformations. These invariant properties enable us to show that a continuous random vector is PDS (PDUO) if and only of its copula is PDS (PDUO). In addition, using the properties of generalized left-continuous and right-continuous inverse functions, we give a rigorous proof for the invariant property of copulas under increasing transformations on the components of any random vector. This result generalizes Proposition 4.7.4 of Denuit et al. (2005) and Proposition 5.6. of McNeil et al. (2005).

Keywords: IM10; Dependent risk; Positive dependence; CI; CIS; PDS; PDUO; Copula; Survival copula; Generalized left-continuous inverse function; Generalized right-continuous inverse function (search for similar items in EconPapers)
JEL-codes: C02 C60 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:50:y:2012:i:1:p:43-49

DOI: 10.1016/j.insmatheco.2011.10.003

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