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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. 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.
    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. 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.

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