stochastic dominance

Convexification of Stochastic Ordering

  • Darinka Dentcheva
  • Andrzej Ruszczyński
    • Categories Convex and Nonsmooth Optimization, Finance and Economics, Stochastic Programming Tags ,

    We consider sets defined by the usual stochastic ordering relation and by the second order stochastic dominance relation. Under fairy general assumptions we prove that in the space of integrable random variables the closed convex hull of the first set is equal to the second set. Article Download View Convexification of Stochastic Ordering

    Portfolio Optimization with Stochastic Dominance Constraints

  • Darinka Dentcheva
  • Andrzej Ruszczyński
    • Categories Convex Optimization, Finance and Economics, Stochastic Programming Tags , , ,

    We consider the problem of constructing a portfolio of finitely many assets whose returns are described by a discrete joint distribution. We propose a new portfolio optimization model involving stochastic dominance constraints on the portfolio return. We develop optimality and duality theory for these models. We construct equivalent optimization models with utility functions. Numerical illustration … Read more