2024/06/04 by Mario Ghossoub, Ghossoub, Mario, Michael B. Zhu +1 · 3 citations
Economics, Econometrics and Finance · #Economic theories and models #FOS: Economics and business #Mathematical Finance (q-fin.MF) #Monetary Policy and Economic Impact #Risk Management (q-fin.RM) #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2406.02712
openalex publication_date 2024/06/04 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of monotone, (quasi-)concave, Schur concave, and translation-invariant utility functionals. This covers a large class of utility functionals, including a variety of law-invariant robust utilities. We show that Pareto optima exist and are comonotone, and we provide a crisp characterization thereof in the case of law-invariant positively homogeneous monetary utilities. This characterization provides an easily implementable algorithm that fully determines the shape of Pareto-optimal allocations. In the special case of law-invariant comonotone-additive monetary utility functionals (concave Yaari-Dual utilities), we provide a closed-form characterization of Pareto optima. As an application, we examine risk-sharing markets where all agents evaluate risk through law-invariant coherent risk measures, a widely popular class of risk measures. In a numerical illustration, we characterize Pareto-optimal risk-sharing for some special types of coherent risk measures.