Imperial College London
Professor Harry Zheng

ProfessorHarryZheng

Faculty of Natural Sciences, Department of Mathematics

Professor of Mathematics
 
 
 
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Contact

 

+44 (0)20 7594 8539h.zheng Website

 
 
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Location

 

6M16Huxley BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Liu:2015:10.1016/j.insmatheco.2015.10.014,
author = {Liu, C and Zheng, H},
doi = {10.1016/j.insmatheco.2015.10.014},
journal = {Insurance Mathematics & Economics},
pages = {59--68},
title = {Asymptotic analysis for target asset portfolio allocation with small transaction costs},
url = {http://dx.doi.org/10.1016/j.insmatheco.2015.10.014},
volume = {66},
year = {2015}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - In this paper we discuss the asset allocation in the presence of small proportional transaction costs. The objective is to keep the asset portfolio close to a target portfolio and at the same time to reduce the trading cost in doing so. We derive the variational inequality and prove a verification theorem. Furthermore, we apply the second order asymptotic expansion method to characterize explicitly the optimal no transaction region when the transaction cost is small and show that the boundary points are asymmetric in relation to the target portfolio position, in contrast to the symmetric relation when only the first order asymptotic expansion method is used, and the leading order is a constant proportion of the cubic root of the small transaction cost. In addition, we use the asymptotic results for the boundary points and obtain an expansion for the value function. The results are illustrated in the numerical example.
AU  - Liu,C
AU  - Zheng,H
DO  - 10.1016/j.insmatheco.2015.10.014
EP  - 68
PY  - 2015///
SN  - 0167-6687
SP  - 59
TI  - Asymptotic analysis for target asset portfolio allocation with small transaction costs
T2  - Insurance Mathematics & Economics
UR  - http://dx.doi.org/10.1016/j.insmatheco.2015.10.014
UR  - http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000368745400006&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=1ba7043ffcc86c417c072aa74d649202
UR  - http://hdl.handle.net/10044/1/30823
VL  - 66
ER  -
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