Related papers: On Kelly Betting: Some Limitations
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…
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…
Kelly betting is a prescription for optimal resource allocation among a set of gambles which are typically repeated in an independent and identically distributed manner. In this setting, there is a large body of literature which includes…
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…
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…
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…
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…
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…
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 consider the classic Kelly gambling problem with general distribution of outcomes, and an additional risk constraint that limits the probability of a drawdown of wealth to a given undesirable level. We develop a bound on the drawdown…
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…
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…
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…
Consider a gambling game in which we are allowed to repeatedly bet a portion of our bankroll at favorable odds. We investigate the question of how to minimize the expected number of rounds needed to increase our bankroll to a given target…
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 study the problem of optimizing the betting frequency in a dynamic game setting using Kelly's celebrated expected logarithmic growth criterion as the performance metric. The game is defined by a sequence of bets with independent and…
This paper characterizes the best possible rate of growth of wealth in a Kelly betting game when repeatedly betting against a general i.i.d. null hypothesis $\mathscr{P}$, but the data are drawn i.i.d from an arbitrary alternative $Q$. We…
Following a series of works on capital growth investment, we analyse log-optimal portfolios where the return evaluation includes `weights' of different outcomes. The results are twofold: (A) under certain conditions, the logarithmic growth…
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,…
We investigate the performance of the Kelly rule in a setting in which the dynamics of the return is represented by a time change process. We find that in this general semi-martingale setting the Kelly rule does not maximize the average…