Journal
JOURNAL OF BANKING & FINANCE
Volume 30, Issue 2, Pages 433-451Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2005.04.024
Keywords
portfolio optimization; Stochastic dominance; Stochastic order; risk; utility function; duality
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We consider the problem of constructing a portfolio of finitely many assets whose return rates are described by a discrete joint distribution. We propose a new portfolio optimization model involving stochastic dominance constraints on the portfolio return rate. We develop optimality and duality theory for these models. We construct equivalent optimization models with utility functions. Numerical illustration is provided. (c) 2005 Elsevier B.V. All rights reserved.
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