Orderings and probability functionals consistent with preferences

Sergio Ortobelli, Svetlozar T. Rachev, Haim Shalit, Frank J. Fabozzi

Research output: Contribution to journalArticlepeer-review

15 Scopus citations


This paper unifies the classical theory of stochastic dominance and investor preferences with the recent literature on risk measures applied to the choice problem faced by investors. First, we summarize the main stochastic dominance rules used in the finance literature. Then we discuss the connection with the theory of integral stochastic orders and we introduce orderings consistent with investors' preferences. Thus, we classify them, distinguishing several categories of orderings associated with different classes of investors. Finally, we show how we can use risk measures and orderings consistent with some preferences to determine the investors' optimal choices.

Original languageEnglish
Pages (from-to)81-102
Number of pages22
JournalApplied Mathematical Finance
Issue number1
StatePublished - 2009


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