Continuous-Time Mean-Variance Portfolio Selection: A Stochastic LQ Framework

摘要: This paper is concerned with a continuous-time mean-variance portfolio selection model that is formulated as a bicriteria optimization problem. The objective is to maximize the expected terminal return and minimize the variance of the terminal wealth. By putting weights on the two criteria one obtains a single objective stochastic control problem which is however not in the standard form due to the variance term involved. It is shown that this nonstandard problem can be``embedded''into a class of auxiliary stochastic linear-quadratic (LQ) …