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Frontiers of stochastically nondominated portfolios. (English) Zbl 1154.91475
Summary: We consider the problem of constructing a portfolio of finitely many assets whose returns are described by a discrete joint distribution.We propose mean-risk models that are solvable by linear programming and generate portfolios whose returns are nondominated in the sense of second-order stochastic dominance. Next, we develop a specialized parametric method for recovering the entire mean-risk efficient frontiers of these models and we illustrate its operation on a large data set involving thousands of assets and realizations.

91B28 Finance etc. (MSC2000)
90C15 Stochastic programming
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