Mean–variance portfolio selection under a constant elasticity of variance model

Abstract

This paper discusses a mean–variance portfolio selection problem under a constant elasticity of variance model. A backward stochastic Riccati equation is first considered. Then we relate the solution of the associated stochastic control problem to that of the backward stochastic Riccati equation. Finally, explicit expressions of the optimal portfolio strategy, the value function and the efficient frontier of the mean–variance problem are expressed in terms of the solution of the backward stochastic Riccati equation.