Higher-order Omega: A performance index with a decision-theoretic foundation

Hongwei Bi, Rachel J. Huang, Larry Y. Tzeng, Wei Zhu

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


This paper proposes a new performance index referred to as the Nth-order Omega that includes the well-known Omega as a special case. The index is established by adopting an approach that is free of a utility functional form or/and distributional assumptions. A decision-theoretic foundation for our index is further established through introducing a new distribution ranking criterion. The index is monotonic with respect to Nth-degree stochastic dominance and offers a complete ordering on gambles. An empirical example of deriving the optimal hedge ratio is demonstrated to show the applicability of the index.

Original languageEnglish
Pages (from-to)43-57
Number of pages15
JournalJournal of Banking and Finance
StatePublished - Mar 2019


  • Acceptance dominance
  • Almost stochastic dominance
  • Optimal hedge ratio
  • Performance index
  • Riskiness index


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