The no-trade interval of Dow and Werlang: Some clarifications

Alain Chateauneuf (1, 2) , Caroline Ventura (2)

1 PSE - Paris School of Economics
2 CES - Centre d'économie de la Sorbonne

The aim of this paper is two-fold: first, to emphasize that the seminal result of Dow and Werlang (1992) remains valid under weaker conditions, and this even if non-positive prices are considered, or equally that the no-trade interval result is robust when considering assets which can yield non-positive outcomes. Second, to make precise the weak uncertainty aversion behavior characteristic of the existence of such an interval.

Mots clés: Choquet expected utility; No-trade interval; Perfect hedging; Comonotone diversification; Capacity

Domaines: Economies et finances

Alain Chateauneuf, Caroline Ventura. The no-trade interval of Dow and Werlang: Some clarifications. Mathematical Social Sciences, 2010, 59 (1), pp.1-14. ⟨10.1016/j.mathsocsci.2009.09.008⟩. ⟨hal-00634653⟩