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.
|Journal||International Journal of Theoretical and Applied Finance|
|State||Published - Mar 2012|
- Stochastic dominance
- almost stochastic orders
- average value-at-risk