FEB Research Report AFI_1273
Publication date:
2012-09-01
11
Publisher:
KU Leuven - Faculty of Economics and Business
Author:
Dhaene, Jan
Kukush, Alexander ; Linders, Daniël ; Tang, Qihe
Keywords:
comonotonicity, distorted expectation, distortion risk measure, TVaR, quantile
Abstract:
Distorted expectations can be expressed as mixtures of quantiles. In this note, we show that this statement is essentially true, but that one has to be careful with the correct formulation of it. Furthermore, the proofs of the additivity property for distorted expectations of a comonotonic sum that appear in the literature often do not cover the case of a general distortion function. We present a straightforward proof for the general case, making use of the appropriate expressions for distorted expectations in terms of mixtures of quantiles.