Related papers: Diversification and limited information in the Kel…
In imperfect information games (e.g. Bridge, Skat, Poker), one of the fundamental considerations is to infer the missing information while at the same time avoiding the disclosure of private information. Disregarding the issue of protecting…
We study the classic divide-and-choose method for equitably allocating divisible goods between two players who are rational, self-interested Bayesian agents. The players have additive values for the goods. The prior distributions on those…
Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows…
We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…
The original Kelly criterion provides a strategy to maximize the long-term growth of winnings in a sequence of simple Bernoulli bets with an edge, that is, when the expected return on each bet is positive. The objective of this work is to…
Poker is in the family of imperfect information games unlike other games such as chess, connect four, etc which are perfect information game instead. While many perfect information games have been solved, no non-trivial imperfect…
For a sequence of binary bets, the Kelly criterion provides a closed-form solution that maximizes the expected growth rate of wealth. In contrast, when multiple bets are placed simultaneously (e.g., in portfolio allocation or prediction…
Models of adaptive bet-hedging commonly adopt insights from Kelly's famous work on optimal gambling strategies and the financial value of information. In particular, such models seek evolutionary solutions that maximize long term average…
This paper examines strategic trading under incomplete information, where firms lack full knowledge of key aspects of their competitors' trading strategies such as target sizes and market impact models. We extend previous work on…
Kelly's criterion is a betting strategy that maximizes the long term growth rate, but which is known to be risky. Here, we find optimal betting strategies that gives the highest capital growth rate while keeping a certain low value of risky…
We study the role of costly information in non-cooperative two-player games when an extrinsic third party information broker is introduced asymmetrically, allowing one player to obtain information about the other player's action. This…
Financial markets investors are involved in many games -- they must interact with other agents to achieve their goals. Among them are those directly connected with their activity on markets but one cannot neglect other aspects that…
The paper provides a mathematical model and a tool for the focused investing strategy as advocated by Buffett, Munger, and others from this investment community. The approach presented here assumes that the investor's role is to think about…
We introduce the "relative diffuseness" assumption to characterize the differences between payoff-relevant and strategy-relevant diffuseness of information. Based on this assumption, the existence of pure strategy equilibria in games with…
In this paper, we consider a simple discrete-time optimal betting problem using the celebrated Kelly criterion, which calls for maximization of the expected logarithmic growth of wealth. While the classical Kelly betting problem can be…
Differential games with asymmetric information were introduced by Cardaliaguet (2007). As in repeated games with lack of information on both sides (Aumann and Maschler (1995)), each player receives a private signal (his type) before the…
This paper aims to solve two fundamental problems on finite or infinite horizon dynamic games with perfect or almost perfect information. Under some mild conditions, we prove (1) the existence of subgame-perfect equilibria in general…
We present a new model of incomplete information games without private information in which the players use a distributionally robust optimization approach to cope with the payoff uncertainty. With some specific restrictions, we show that…
Estimating discrete games of complete information is often computationally difficult due to partial identification and the absence of closed-form moment characterizations. This paper proposes computationally tractable approaches to…
When the available statistical information is imperfect, it is dangerous to follow standard optimisation procedures to construct an optimal portfolio, which usually leads to a strong concentration of the weights on very few assets. We…