Comonotone random variables in economics: A review of some results

Alain Chateauneuf, Michèle Cohen and Robert Kast
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Michèle Cohen: CEME - Université Paris 1
Robert Kast: GREQAM, CNRS

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: Different notions of comonotony dispersed in a wide range of literature are reviewed. We first gather and analyse different definitions and properties that have been given in various contexts, then we emphasize several relevant applications of comonotony in economics. This includes decision theory along the line of the "non-expected" utility models and its applications to the measure of risk, risk aversion and aversion to uncertainty. A characterization of Pareto optimal allocation for risk averse agents, using comonotony, is particularly relevant to the theory of insurance. Inequality measurement is reviewed along its implicit use of comonotony and a generalization is proposed. The hedging effect of non-comonotone random variables is applied to financial assets valuation and to insurance premium

Keywords: Comonotony; hedging; risk; uncertainty; dispersion; inequality; sharing risks (search for similar items in EconPapers)
JEL-codes: D61 D63 D71 D80 D81 G12 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1997-02
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:97032

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