Related papers: Investing Is Compression
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…
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…
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…
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…
Financial markets, with their vast range of different investment opportunities, can be seen as a system of many different simultaneous games with diverse and often unknown levels of risk and reward. We introduce generalizations to 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…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
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…
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…
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…
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…
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…
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…
We study T. Cover's rebalancing option (Ordentlich and Cover 1998) under discrete hindsight optimization in continuous time. The payoff in question is equal to the final wealth that would have accrued to a $\$1$ deposit into the best of…
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…
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…
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 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…
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…
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of…