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arXiv · 2008.02420

Minimal Quantile Functions Subject to Stochastic Dominance Constraints

Xiangyu Wang·Jianming Xia·Zuo Quan Xu·Zhou Yang
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Abstract

We consider a problem of finding an SSD (second-order stochastic dominance)-minimal quantile function subject to the mixture of FSD (first-order stochastic dominance) and SSD constraints. The SSD-minimal solution is explicitly worked out and has a close relation to the Skorokhod problem. This result is then applied to explicitly solve a risk minimizing problem in financial economics.

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BibTeXRIS

Xiangyu Wang, Jianming Xia, Zuo Quan Xu, Zhou Yang. 2020-08-06. Minimal Quantile Functions Subject to Stochastic Dominance Constraints. https://arxiv.org/abs/2008.02420

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