Second Order Stochastic Dominance as a Risk Measure
This project will study second order stochastic dominance as a coherent risk measure, which plays a centre role in investment analysis and risk management. Current measures of risk suffer from a multitude of problems, namely, that they often require parametric assumptions about the utility function of the investor. However, very little is known about such empirical utility functions and it is much acknowledged that frequently used utility functions are often chosen for their mathematical properties rather than for their empirical validity. Amidst these problems, second order stochastic dominance is a concept which holds for any risk averse investor and which indicates which investment to prefer (unless there is a tie). The current research tries to develop this interesting concept further in order to use it as a risk measure that is preference free thus generally applicable to all risk averse investors.
- FB Wirtschaftswissenschaften
|Period:||01.09.2009 – 31.08.2011|