Law-invariant functionals on general spaces of random variables

F Bellini, P Koch-Medina, C Munari… - SIAM Journal on Financial …, 2021 - SIAM
F Bellini, P Koch-Medina, C Munari, G Svindland
SIAM Journal on Financial Mathematics, 2021SIAM
We establish general versions of a variety of results for quasiconvex, lower-semicontinuous,
and law-invariant functionals. Our results extend well-known results from the literature to a
large class of spaces of random variables. We sometimes obtain sharper versions, even for
the well-studied case of bounded random variables. Our approach builds on two
fundamental structural results for law-invariant functionals: the equivalence of law invariance
and Schur convexity, ie, monotonicity with respect to the convex stochastic order, and the …
We establish general versions of a variety of results for quasiconvex, lower-semicontinuous, and law-invariant functionals. Our results extend well-known results from the literature to a large class of spaces of random variables. We sometimes obtain sharper versions, even for the well-studied case of bounded random variables. Our approach builds on two fundamental structural results for law-invariant functionals: the equivalence of law invariance and Schur convexity, i.e., monotonicity with respect to the convex stochastic order, and the fact that a law-invariant functional is fully determined by its behavior on bounded random variables. We show how to apply these results to provide a unifying perspective on the literature on law-invariant functionals, with special emphasis on quantile-based representations, including Kusuoka representations, dilatation monotonicity, and infimal convolutions.
Society for Industrial and Applied Mathematics
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