Portfolio Optimization With Stochastic Dominance Constraints

Darinka Dentcheva and Andrzej Ruszczynski ()

Finance from University Library of Munich, Germany

Abstract: 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 is provided.

Keywords: portfolio optimization; stochastic dominance; risk; utility functions; duality (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Date: 2004-02-19, Revised 2006-03-02
New Economics Papers: this item is included in nep-cfn, nep-cmp, nep-fin and nep-rmg
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Citations: View citations in EconPapers (56)

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Related works:
Journal Article: Portfolio optimization with stochastic dominance constraints (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0402016

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