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Convex Order, Excess of Loss, and Comonotonicity

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Abstract

In this chapter we derive that comonotonicity is the worst case dependence structure concerning convex order of the joint portfolio \(\sum _{i=1}^{n}X_{i}\) or equivalently of the excess of loss. Two different approaches to this result are given. The first approach due to Meilijson and Nadas (1979) is based on a simple duality argument and uses just a monotonicity property of the inverse distribution function.

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Rüschendorf, L. (2013). Convex Order, Excess of Loss, and Comonotonicity. In: Mathematical Risk Analysis. Springer Series in Operations Research and Financial Engineering. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33590-7_3

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