Risk sharing under heterogeneous beliefs without convexity
Abstract
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference probability measures. Moreover, we assume that the individual risk assessments are consistent with the respective second-order stochastic dominance relations. We do not assume their convexity though. A simple sufficient condition for the existence of Pareto optima is provided. The proof combines local comonotone improvement with a Dieudonn\'e-type argument, which also establishes a link of the optimal allocation problem to the realm of "collapse to the mean" results. Finally, we extend the results to capital requirements with multidimensional security markets.
Keywords
Cite
@article{arxiv.2108.05791,
title = {Risk sharing under heterogeneous beliefs without convexity},
author = {Felix-Benedikt Liebrich},
journal= {arXiv preprint arXiv:2108.05791},
year = {2022}
}