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Stochastic efficiency and inefficiency in portfolio optimization with incomplete information: a set-valued probability approach

Author

Listed:
  • D. La Torre

    (Université Côte d’Azur)

  • F. Mendivil

    (Acadia University)

Abstract

In this paper we extend the notion of stochastic efficiency and inefficiency in portfolio optimization to the case of incomplete information by means of set-valued probabilities. The notion of set-valued probability models the concept of incomplete information about the underlying probability space and the probability associated with each scenario. Unlike other approaches in literature, our notion of inefficiency is introduced by means of the Monge–Kantorovich metric. We provide some numerical examples to illustrate this approach.

Suggested Citation

  • D. La Torre & F. Mendivil, 2022. "Stochastic efficiency and inefficiency in portfolio optimization with incomplete information: a set-valued probability approach," Annals of Operations Research, Springer, vol. 311(2), pages 1085-1098, April.
    • Handle: RePEc:spr:annopr:v:311:y:2022:i:2:d:10.1007_s10479-020-03886-0
    DOI: 10.1007/s10479-020-03886-0
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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