Robust asymptotic growth in stochastic portfolio theory under long-only constraints

We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) aMarkovian volatility matrix c(x) and (ii) an invariant density p(x) for the market weights, but we additionally impose long-only constraints on the investor. Our principal contribution is proving a uniqueness and existence result for the class of concave functionally generated portfolios and developing a finite dimensional approximation, which can be used to numerically find the optimum. In addition to the general results outlined above, we propose the use of a broad class of models for the volatility matrix c(x), which can be calibrated to data and, under which, we obtain explicit formulas of the optimal unconstrained portfolio for any invariant density.