Lattice structures for the stochastic comparison of call ratio backspread derivatives with an application

  1. María Concepción López-Díaz 1
  2. Miguel López-Díaz 1
  3. Sergio Martínez-Fernández 2
  1. 1 Universidad de Oviedo
    info
    Universidad de Oviedo

    Oviedo, España

    ROR https://ror.org/006gksa02

    Geographic location of the organization Universidad de Oviedo
  2. 2 Banco Sabadell
Journal:
Sort: Statistics and Operations Research Transactions

ISSN: 1696-2281

Year of publication: 2025

Volume: 49

Issue: 1

Pages: 73-92

Type: Article

DOI: 10.57645/20.8080.02.23 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Sort: Statistics and Operations Research Transactions

Abstract

The comparison of investments in financial derivatives is an appealing topic in the optimization of resources. A relevant derivative is the call ratio backspread. Motivated by the need to compare investments in such derivatives, a new family of stochastic orders is introduced. That permits to reach decisions on the allocations of funds in those derivatives under general conditions and without assuming specific probability distributions of the asset prices. Characterizations of the orders are developed. Special emphasis is placed on the existence of infima and suprema in such dominance criteria, which leads to lattice structures on some special spaces and to the reduction of some optimization problems with stochastic dominance constraints. The method is illustrated with an application using real data from financial markets.

Data source: Dialnet