2026/03/19 by Brandon Tam, Mario Ghossoub, Silvana M. Pesenti · 1 voice · 1 citation
Economics, Econometrics and Finance · #q-fin.RM
We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We introduce the notion of dynamic Pareto-optimal allocation processes and show that such processes can be constructed recursively starting with the allocation at the terminal time. We further derive a comonotone improvement theorem for allocation processes, and we provide a recursive approach to constructing comonotone dynamic Pareto optima when the agents' preferences are coherent and satisfy a property that we call equidistribution-preserving. In the special case where each agent's dynamic risk measure is of the distortion type, we provide a closed-form characterization of comonotone dynamic Pareto optima. We illustrate our results in a two-period setting.