Related papers: Sizing the bets in a focused portfolio
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…
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…
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 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…
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…
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…
This work proposes a unified framework for portfolio allocation, covering both asset selection and optimization, based on a multiple-hypothesis predict-then-optimize approach. The portfolio is modeled as a structured ensemble, where each…
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 introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
Sharpe et al. proposed the idea of having an expected utility maximizer choose a probability distribution for future wealth as an input to her investment problem instead of a utility function. They developed a computer program, called The…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
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…
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 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…
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…
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…
The main purpose of this study is to introduce a semi-classical model describing betting scenarios in which, at variance with conventional approaches, the payoff of the gambler is encoded into the internal degrees of freedom of a quantum…
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 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…
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…