An unexpected stochastic dominance: Pareto distributions, dependence, and diversification
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2022
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| Materias: | |
| Acceso en línea: | |
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| _version_ | 1866916157864280064 |
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| author | Chen, Yuyu Embrechts, Paul Wang, Ruodu |
| author_facet | Chen, Yuyu Embrechts, Paul Wang, Ruodu |
| contents | We find the perhaps surprising inequality that the weighted average of independent and identically distributed Pareto random variables with infinite mean is larger than one such random variable in the sense of first-order stochastic dominance. This result holds for more general models including super-Pareto distributions, negative dependence, and triggering events, and yields superadditivity of the risk measure Value-at-Risk for these models. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2208_08471 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | An unexpected stochastic dominance: Pareto distributions, dependence, and diversification Chen, Yuyu Embrechts, Paul Wang, Ruodu Risk Management Theoretical Economics Probability We find the perhaps surprising inequality that the weighted average of independent and identically distributed Pareto random variables with infinite mean is larger than one such random variable in the sense of first-order stochastic dominance. This result holds for more general models including super-Pareto distributions, negative dependence, and triggering events, and yields superadditivity of the risk measure Value-at-Risk for these models. |
| title | An unexpected stochastic dominance: Pareto distributions, dependence, and diversification |
| topic | Risk Management Theoretical Economics Probability |
| url | https://arxiv.org/abs/2208.08471 |