Extreme negative dependence and risk aggregation


We introduce the concept of an extremely negatively dependent (END) sequence of random variables with a given common marginal distribution. An END sequence has a partial sum which, subtracted by its mean, does not diverge as the number of random variables goes to infinity. We show that an END sequence always exists for any given marginal distributions with a finite mean and we provide a probabilistic construction. Through such a construction, the partial sum of identically distributed but dependent random variables is controlled by a random variable that depends only on the marginal distribution of the sequence. We provide some properties and examples of our construction. The new concept and derived results are used to obtain asymptotic bounds for risk aggregation with dependence uncertainty. Key-words: negative dependence; variance reduction; sums of random variables; central limit theorem; risk aggregation. Mathematics Subject Classification (2010): 60F05, 60E15

DOI: 10.1016/j.jmva.2015.01.006

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@article{Wang2015ExtremeND, title={Extreme negative dependence and risk aggregation}, author={Bin Wang and Ruodu Wang}, journal={J. Multivariate Analysis}, year={2015}, volume={136}, pages={12-25} }