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Comonotone random variables in economics: A review of some results

Author

Listed:
  • Alain Chateauneuf

    (CERMSEM - Université Paris 1)

  • Michèle Cohen

    (CEME - Université Paris 1)

  • Robert Kast

    (GREQAM, CNRS)

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

Suggested Citation

  • Alain Chateauneuf & Michèle Cohen & Robert Kast, 1997. "Comonotone random variables in economics: A review of some results," Cahiers de la Maison des Sciences Economiques 97032, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:97032
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    File URL: https://shs.hal.science/halshs-04252285
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    More about this item

    Keywords

    Comonotony; hedging; risk; uncertainty; dispersion; inequality; sharing risks;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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