Report Title：Impact of Liquidity Risk in Portfolio Selection: A New Approach
Reporter：Professor Zhu Songping
Affiliation: University of Wollongong
Report Time:14:00-15:00 June 23,2026
Report Location: First Lecture Hall, Wu Zhuoqun Building
University Contact: Han Yuecai (hanyc@jlu.edu.cn)
Abstract:
In the literature on optimal portfolio selection, closed-form solutions are rare, especially when the additional liquidity risk is taken into consideration. In this talk, a new closed-form solution for a revised Merton (1969) model, subject to a particular form of market illiquidity, is presented. Our success hinges on innovatively interpreting the so-called “wealth turnover” adopted by Guasoni & Weber (2019) under the framework of the Leland transaction cost model (1985). As a result, we have managed to preserve the tractability so that an exact closed-form solution can be found, which enables us to provide a better discussion on the impact of liquidity risk in portfolio optimization without making an assumption on the order of the liquidity parameter, at least mathematically. As a solution verification process, we have compared our results with those of the Merton (1969) and Guasoni & Weber (2019), respectively.
Bio:
Professor Zhu Songping is a senior professor in the Department of Applied Mathematics at the University of Wollongong, Australia. He graduated from the University of Michigan with a PhD in December 1987 and has published over 200 papers in international journals and conference proceedings, attracting over $2 million in funding support from the Australian Research Council (ARC) and private enterprises. Furthermore, Professor Zhu Songping has organized two international conferences and been invited to speak at numerous international conferences. His research work has been widely recognized both domestically and internationally. According to ISI Web of Science data, his papers have been cited over 2,000 times, with an H-index of 27.
