A generalized approach to stochastic dominance
 
 
Description:  In the theory of decision under uncertainty, ranking probability distributions with respect to the preferences of decision makers represents a major issue. In this context, the main ranking criteria are the first and the second-order stochastic dominance, FSD and SSD, respectively, due to their several applications in Economics, Econometrics and Finance. Basically, FSD represents decision makers who prefer “more to less”, whilst SSD represents those who are also risk-averse. However, FSD is generally not verifiable in practice, whereas SSD might be too restrictive, not being appropriate for decision makers who exhibit some degree of flexibility, in terms of risk attraction, in their preferences. To model the transition from FSD to SSD with elasticity, we introduce a generalized family of stochastic orders that yields these two main orders as special (or limiting) cases. The method is based on a transformation of the cumulative distribution functions, generally referred to as probability distortion.
Date:  2019-11-13
Start Time:   14:30
Speaker:  Tommaso Lando (Univ. of Bergamo, Italy & VSB-TU Ostrava, Czech Republic)
Institution:  Univ. of Bergamo, Italy & VSB-TU Ostrava, Czech Republic
Place:  Sala 5.5
Research Groups: -Probability and Statistics
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