Ibragimov, Rustam; Walden, Johan - In: Insurance: Mathematics and Economics 42 (2008) 2, pp. 594-599
This paper analyzes portfolio diversification for nonlinear transformations of heavy-tailed risks. It is shown that diversification of a portfolio of convex functions of heavy-tailed risks increases the portfolio's riskiness if expectations of these risks are infinite. In contrast, for concave...