An overview of conditional comonotonicity and its applications

Issue title: The Interplay between Finance and Actuarial Science

Article type: Research Article

Authors: Cheung, Ka Chun

Affiliations: Department of Statistics and Actuarial Science, University of Hong Kong, Pokfulam Road, Hong Kong, China. Tel.: +852 28591987; Fax: +852 28589041; E-mail: kccg@hku.hk

Abstract: Comonotonicity has proved to be a powerful and useful tool in financial economics and actuarial science. Jouini and Napp [Decision in Economics and Finance 27(2) (2004), 153–166] generalized it to a new concept called conditional comonotonicity. While preserving the advantage of being analytically tractable, the extra freedom of the choice of the conditioning map or sigma-field makes this new concept more flexible than the classical concept of comonotonicity. This article serves to provide a systemic overview, together with some of its applications, of this relatively new notion.

Keywords: Comonotonicity, conditional comonotonicity, convex order

DOI: 10.3233/RDA-2011-0052

Journal: Risk and Decision Analysis, vol. 3, no. 1-2, pp. 67-73, 2012