Super- and sub-additive envelopes of aggregation functions: interplay between local and global properties, and approximation

Super- and sub-additive transformations of aggregation functions have been recently introduced by Greco, Mesiar, Rindone and Sipeky [The superadditive and the subadditive transformations of integrals and aggregation functions, Fuzzy Sets and Systems 291 (2016), 40{53]. In this article we give a survey of the recent development regarding the existence of aggregation functions with a preassigned super- and sub-additive transformation, and address approximation of these transformations. The underpinning feature of the presented results is dependence of global properties of super- and sub-additive transformations on local properties of aggregation functions

Aggregation functions with given super-additive and sub-additive transformations

Aggregation functions and their transformations have found numerous applications in various kinds of systems as well as in economics and social science. Every aggregation function is known to be bounded above and below by its super-additive and sub-additive transformations. We are interested in the “inverse” problem of whether or not every pair consisting of a super-additive function dominating a sub-additive function comes from some aggregation function in the above sense. Our main results provide a negative answer under mild extra conditions on the super- and sub-additive pair. We also show that our results are, in a sense, best possible

Risk measures and theories of choice

We discuss classes of risk measures in terms both of their axiomatic definitions and of the economic theories of choice that they can be derived from. More specifically, expected utility theory gives rise to the exponential premium principle, proposed by Gerber (1974), Dhaene et al. (2003), whereas Yaari's (1987) dual theory of choice under risk can be viewed as the source of the distortion premium principle (Denneberg, 1990; Wang, 1996). We argue that the properties of the exponential and distortion premium principles are complementary, without either of the two performing completely satisfactorily as a risk measure. Using generalised expected utility theory (Quiggin, 1993), we derive a new risk measure, which we call the distortion-exponential principle. This risk measure satisfies the axioms of convex measures of risk, proposed by Föllmer & Shied (2002a,b), and its properties lie between those of the exponential and distortion principles, which can be obtained as special cases

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples

Properties of risk measures for extreme risks have become an important topic of research. In the present paper we discuss sub- and superadditivity of quantile based risk measures and show how multivariate extreme value theory yields the ideal modeling environment. Numerous examples and counter-examples highlight the applicability of the main results obtaine

Expressive Power of Weighted Propositional Formulas for Cardinal Preference Modelling

As proposed in various places, a set of propositional formulas, each associated with a numerical weight, can be used to model the preferences of an agent in combinatorial domains. If the range of possible choices can be represented by the set of possible assignments of propositional symbols to truth values, then the utility of an assignment is given by the sum of the weights of the formulas it satisfies. Our aim in this paper is twofold: (1) to establish correspondences between certain types of weighted formulas and well-known classes of utility functions (such as monotonic, concave or k-additive functions); and (2) to obtain results on the comparative succinctness of different types of weighted formulas for representing the same class of utility functions

Risk measurement with the equivalent utility principles.

Risk measures have been studied for several decades in the actuarial literature, where they appeared under the guise of premium calculation principles. Risk measures and properties that risk measures should satisfy have recently received considerable at- tention in the financial mathematics literature. Mathematically, a risk measure is a mapping from a class of random variables defined on some measurable space to the (extended) real line. Economically, a risk measure should capture the preferences of the decision-maker. In incomplete financial markets, prices are no more unique but depend on the agents' attitudes towards risk. This paper complements the study initiated in Denuit, Dhaene & Van Wouwe (1999) and considers several theories for decision under uncertainty: the classical expected utility paradigm, Yaari's dual approach, maximin expected utility theory, Choquet expected utility theory and Quiggin rank-dependent utility theory. Building on the actuarial equivalent utility pricing principle, broad classes of risk measures are generated, of which most classical risk measures appear to be particular cases. This approach shows that most risk measures studied recently in the financial literature disregard the utility concept (i.e. correspond to linear utilities), causing some deficiencies. Some alternatives proposed in the literature are discussed, based on exponential utilities.Actuarial; Coherence; Decision; Expected; Market; Markets; Measurement; Preference; Premium; Prices; Pricing; Principles; Random variables; Research; Risk; Risk measure; Risk measurement; Space; Studies; Theory; Uncertainty; Utilities; Variables;