Correlated risks, bivariate utility and optimal choices

被引:35
作者
Denuit, Michel M. [2 ,3 ]
Eeckhoudt, Louis [4 ,5 ]
Menegatti, Mario [1 ]
机构
[1] Univ Parma, Dipartimento Econ, I-43100 Parma, Italy
[2] Catholic Univ Louvain, Inst Sci Actuarielles, B-1348 Louvain, Belgium
[3] Catholic Univ Louvain, Inst Stat, B-1348 Louvain, Belgium
[4] LEM, IESEG Sch Management, F-59800 Lille, France
[5] Catholic Univ Louvain, CORE, B-1348 Louvain, Belgium
关键词
Precautionary savings; Background risk; Bivariate higher order increasing concave stochastic dominance; Risks correlation; STOCHASTIC ORDERINGS; BACKGROUND RISK; AVERSION; DISTRIBUTIONS; UNCERTAINTY; DEMAND;
D O I
10.1007/s00199-009-0500-y
中图分类号
F [经济];
学科分类号
02 ;
摘要
In this paper, we consider a decision-maker facing a financial risk flanked by a non-financial background risk such as health or environmental risk. A decision has to be made about the amount of an investment (in the financial dimension) resulting in a future benefit either in the same dimension (savings) or in the other dimension (environmental quality or health improvement). In this framework, we study the impact of the correlation between the two risks on optimal choices. In the saving problem, we find conditions ensuring that positive correlation between the two risks implies that the optimal amount of savings increases. These conditions involve specific requirements on the direct and cross derivatives of the two-argument utility function. Similarly, we find a different and specific set of conditions ensuring that the same conclusion on optimal investment for health (environmental) improvement is reached. The two sets of conditions determined support the conclusion that the signs of the derivatives of the two-argument utility function should alternate.
引用
收藏
页码:39 / 54
页数:16
相关论文
共 29 条
[1]  
[Anonymous], 1988, J. Risk Uncertainty
[2]   THE COMPARISON OF MULTI-DIMENSIONED DISTRIBUTIONS OF ECONOMIC-STATUS [J].
ATKINSON, AB ;
BOURGUIGNON, F .
REVIEW OF ECONOMIC STUDIES, 1982, 49 (02) :183-201
[3]   Precautionary saving in the presence of other risks [J].
Courbage, Christophe ;
Rey, Beatrice .
ECONOMIC THEORY, 2007, 32 (02) :417-424
[4]   A class of bivariate stochastic orderings, with applications in actuarial sciences [J].
Denuit, M ;
Lefèvre, C ;
Mesfioui, M .
INSURANCE MATHEMATICS & ECONOMICS, 1999, 24 (1-2) :31-50
[5]   Extremal generators and extremal distributions for the continuous s-convex stochastic orderings [J].
Denuit, M ;
De Vylder, E ;
Lefèvre, C .
INSURANCE MATHEMATICS & ECONOMICS, 1999, 24 (03) :201-217
[6]  
Denuit M, 2005, ACTUARIAL THEORY FOR DEPENDENT RISKS: MEASURES, ORDERS AND MODELS, P1, DOI 10.1002/0470016450
[7]   The s-convex orders among real random variables, with applications [J].
Denuit, M ;
Lefevre, C ;
Shaked, M .
MATHEMATICAL INEQUALITIES & APPLICATIONS, 1998, 1 (04) :585-613
[8]  
DENUIT M, 2008, 0803 U CATH LOUV I S
[9]  
DENUIT M, 2009, ANN OPER RE IN PRESS
[10]   OPTIMAL INSURANCE IN INCOMPLETE MARKETS [J].
DOHERTY, NA ;
SCHLESINGER, H .
JOURNAL OF POLITICAL ECONOMY, 1983, 91 (06) :1045-1054