Beneficial changes in random variables via copulas: An application to insurance

A risk-averse agent does not necessarily decrease the optimal insurance whenever a beneficial change in the distribution of final wealth occurs. This paper provides sufficient conditions to guarantee such a decrease. Beneficial changes can be induced by either a beneficial loss-distribution shift, by a modification of the dependence structure between the randomness sources, or by both of these. Conditions for each case are stated. Hadar-Seo and Meyer results turn out as special cases. The Geneva Papers on Risk and Insurance Theory (1995) 20, 191–202. doi:10.1007/BF01258396