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Metrization Of Stochastic Dominance Rules

Author

Listed:
  • STOYAN V. STOYANOV

    (EDHEC Business School, EDHEC-Risk Institute–Asia, 1 George Street #07-02, Singapore 049145, Singapore)

  • SVETLOZAR T. RACHEV

    (Department of Applied Mathematics and Statistics, Stony Brook University, Heavy Engineering S250, Stony Brook, NY 11794-3600, USA;
    Karlsruhe Institute of Technology, Germany;
    FinAnalytica, USA)

  • FRANK J. FABOZZI

    (EDHEC Business School, 393, Promenade des Anglais BP3116, 0602-Nice, Cedex 3, France)

Abstract

We consider a new approach towards stochastic dominance rules which allows measuring the degree of domination or violation of a given stochastic order and represents a way of describing stochastic orders in general. Examples are provided for the n-th order stochastic dominance and stochastic orders based on a popular risk measure. We demonstrate how the new approach can be used for construction of portfolios dominating a given benchmark prospect.

Suggested Citation

  • Stoyan V. Stoyanov & Svetlozar T. Rachev & Frank J. Fabozzi, 2012. "Metrization Of Stochastic Dominance Rules," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 15(02), pages 1-22.
    • Handle: RePEc:wsi:ijtafx:v:15:y:2012:i:02:n:s0219024912500173
    DOI: 10.1142/S0219024912500173
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    References listed on IDEAS

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    1. Anand, Paul, 1995. "Foundations of Rational Choice Under Risk," OUP Catalogue, Oxford University Press, number 9780198774426.
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    Cited by:

    1. Takashi Kamihigashi & John Stachurski, 2014. "Partial Stochastic Dominance," Discussion Paper Series DP2014-23, Research Institute for Economics & Business Administration, Kobe University.
    2. Asier Estevan & Roberto Maura & Óscar Valero, 2023. "Quasi-Metrics for Possibility Results: Intergenerational Preferences and Continuity," Mathematics, MDPI, vol. 11(2), pages 1-19, January.
    3. William B. Haskell & J. George Shanthikumar & Z. Max Shen, 2017. "Aspects of optimization with stochastic dominance," Annals of Operations Research, Springer, vol. 253(1), pages 247-273, June.
    4. Takashi Kamihigashi & John Stachurski, 2014. "An Axiomatic Approach to Measuring Degree of Stochastic Dominance," Discussion Paper Series DP2014-36, Research Institute for Economics & Business Administration, Kobe University.

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