Related papers: Diversification and limited information in the Kel…
We consider games of chance played by someone with external capital that cannot be applied to the game and determine how this affects risk-adjusted optimal betting. Specifically, we focus on Kelly optimization as a metric, optimizing the…
Betting games provide a natural setting to capture how information yields strategic advantage. The Kelly criterion for betting, long a cornerstone of portfolio theory and information theory, admits an interpretation in the limit of…
While the Kelly portfolio has many desirable properties, including optimal long-term growth rate, the resulting investment strategy is rather aggressive. In this paper, we suggest a unified approach to the risk assessment of the Kelly…
Prompted by a recent experiment by Victor Haghani and Richard Dewey, this note generalises the Kelly strategy (optimal for simple investment games with log utility) to a large class of practical utility functions and including the effect of…
A sequence of spin-1/2 particles polarised in one of two possible directions is presented to an experimenter, who can wager in a double-or-nothing game on the outcomes of measurements in freely chosen polarisation directions. Wealth is…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
We investigate the problem of gambling with uncertainty in outcome probabilities. Stochastic optimization models are proposed for optimal investing on events with mutually exclusive outcomes when probabilities are estimated using…
In 1956 John Kelly wrote a paper at Bell Labs describing the relationship between gambling and Information Theory. What came to be known as the Kelly Criterion is both an objective and a closed-form solution to sizing wagers when odds and…
The focal point of this paper is the so-called Kelly Criterion, a prescription for optimal resource allocation among a set of gambles which are repeated over time. The criterion calls for maximization of the expected value of the…
We investigate the most popular approaches to the problem of sports betting investment based on modern portfolio theory and the Kelly criterion. We define the problem setting, the formal investment strategies, and review their common…
We investigate quantum games in which the information is asymmetrically distributed among the players, and find the possibility of the quantum game outperforming its classical counterpart depends strongly on not only the entanglement, but…
The Kelly criterion provides a general framework for optimizing the growth rate of an investment portfolio over time by maximizing the expected logarithmic utility of wealth. However, the optimality condition of the Kelly criterion is…
We generalize the seminal framework of Kyle (1985) to a many-asset setting, bridging the gap between informed-trading theory and modern trading practices. Specifically, we formulate an infinite-dimensional Bayesian trading game in which the…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…
In classic Kelly gambling, bets are chosen to maximize the expected log growth of wealth, under a known probability distribution. Breiman provides rigorous mathematical proofs that Kelly strategy maximizes the rate of asset growth…
Risk and uncertainty will always be a matter of experience, luck, skills, and modelling. Leverage is another concept, which is critical for the investor decisions and results. Adaptive skills and quantitative probabilistic methods need to…
For gambling on horses, a one-parameter family of utility functions is proposed, which contains Kelly's logarithmic criterion and the expected-return criterion as special cases. The strategies that maximize the utility function are derived,…
As financial instruments grow in complexity more and more information is neglected by risk optimization practices. This brings down a curtain of opacity on the origination of risk, that has been one of the main culprits in the 2007-2008…
In an information-processing investment game, such as the growth of a population of organisms in a changing environment, Kelly betting maximizes the expected log rate of growth. In this paper, we show that Kelly bets are closely related to…
This paper studies a two-person trading game in continuous time that generalizes Garivaltis (2018) to allow for stock prices that both jump and diffuse. Analogous to Bell and Cover (1988) in discrete time, the players start by choosing fair…