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Realism and practicality of transaction cost approaches in continuous-time portfolio optimisation: the scope of the Morton-Pliska approach

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  • Ralf Korn

Abstract

We review some different approaches to treat the continuous-time portfolio problem under transaction costs and highlight the difficulties with their application to real-world tasks. In particular, we point out the problems and possibilities of using the Morton and Pliska (1995) approach and its asymptotic variant in reality. Copyright Springer-Verlag 2004

Suggested Citation

  • Ralf Korn, 2004. "Realism and practicality of transaction cost approaches in continuous-time portfolio optimisation: the scope of the Morton-Pliska approach," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 60(2), pages 165-174, October.
    • Handle: RePEc:spr:mathme:v:60:y:2004:i:2:p:165-174
    DOI: 10.1007/s001860400359
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    Cited by:

    1. Valeri Zakamouline, 2005. "A unified approach to portfolio optimization with linear transaction costs," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 62(2), pages 319-343, November.
    2. Miklavž Mastinšek, 2006. "Discrete–time delta hedging and the Black–Scholes model with transaction costs," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 64(2), pages 227-236, October.
    3. Yiannis Kamarianakis & Anastasios Xepapadeas, 2006. "Controlling the risky fraction process with an ergodic criterion," Working Papers 0710, University of Crete, Department of Economics.
    4. Yaroslav Melnyk & Frank Thomas Seifried, 2018. "Small†cost asymptotics for long†term growth rates in incomplete markets," Mathematical Finance, Wiley Blackwell, vol. 28(2), pages 668-711, April.

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