Premium
ON THE STABILITY OF CONTINUOUS‐TIME PORTFOLIO PROBLEMS WITH STOCHASTIC OPPORTUNITY SET
Author(s) -
Korn Ralf,
Kraft Holger
Publication year - 2004
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.0960-1627.2004.00197.x
Subject(s) - portfolio , portfolio optimization , stochastic volatility , stochastic optimization , stochastic programming , set (abstract data type) , stochastic investment model , continuous time stochastic process , stability (learning theory) , mathematical economics , mathematical optimization , volatility (finance) , stochastic process , economics , mathematics , econometrics , computer science , financial economics , asset allocation , statistics , machine learning , programming language
In this paper we present some counterexamples to show that an uncritical application of the usual methods of continuous‐time portfolio optimization can be misleading in the case of a stochastic opportunity set. Cases covered are problems with stochastic interest rates, stochastic volatility, and stochastic market price of risk. To classify the problems occurring with stochastic market coefficients, we further introduce two notions of stability of portfolio problems.