Intuitive explanation of the Kelly Criterion
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According to Wikipedia, the optimal fraction of a bankroll to bet is given by expected net winnings of a $1 bet/net winnings if you win. This can be proven using calculus on the expected value of the logarithm of wealth, but I was curious as to whether a more intuitive explanation exists.
statistics
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
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add a comment |
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According to Wikipedia, the optimal fraction of a bankroll to bet is given by expected net winnings of a $1 bet/net winnings if you win. This can be proven using calculus on the expected value of the logarithm of wealth, but I was curious as to whether a more intuitive explanation exists.
statistics
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
$endgroup$
add a comment |
$begingroup$
According to Wikipedia, the optimal fraction of a bankroll to bet is given by expected net winnings of a $1 bet/net winnings if you win. This can be proven using calculus on the expected value of the logarithm of wealth, but I was curious as to whether a more intuitive explanation exists.
statistics
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
$endgroup$
According to Wikipedia, the optimal fraction of a bankroll to bet is given by expected net winnings of a $1 bet/net winnings if you win. This can be proven using calculus on the expected value of the logarithm of wealth, but I was curious as to whether a more intuitive explanation exists.
statistics
statistics
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
asked Dec 20 '18 at 23:49
CasebashCasebash
5,65834271
5,65834271
add a comment |
add a comment |
1 Answer
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Two other issues make the Kelly criterion attractive, in that facing a large number of advantageous bets, I believe it roughly:
maximises the median of the distribution of your future bankroll
minimises the expected time until you achieve a target bankroll level
though it can lead to painful volatility in your bankroll and depends on you accurately assessing the advantageousness of bets; both of these can be addressed by so-called "fractional Kelly betting" at the cost of possibly not taking sufficient advantage of profitable opportunities
answered Jan 1 at 3:18
HenryHenry
99.3k479165
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1 Answer
1
active
oldest
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1 Answer
1
active
oldest
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active
oldest
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active
oldest
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$begingroup$
Two other issues make the Kelly criterion attractive, in that facing a large number of advantageous bets, I believe it roughly:
maximises the median of the distribution of your future bankroll
minimises the expected time until you achieve a target bankroll level
though it can lead to painful volatility in your bankroll and depends on you accurately assessing the advantageousness of bets; both of these can be addressed by so-called "fractional Kelly betting" at the cost of possibly not taking sufficient advantage of profitable opportunities
answered Jan 1 at 3:18
HenryHenry
99.3k479165
$endgroup$
add a comment |
$begingroup$
Two other issues make the Kelly criterion attractive, in that facing a large number of advantageous bets, I believe it roughly:
maximises the median of the distribution of your future bankroll
minimises the expected time until you achieve a target bankroll level
though it can lead to painful volatility in your bankroll and depends on you accurately assessing the advantageousness of bets; both of these can be addressed by so-called "fractional Kelly betting" at the cost of possibly not taking sufficient advantage of profitable opportunities
answered Jan 1 at 3:18
HenryHenry
99.3k479165
$endgroup$
add a comment |
$begingroup$
Two other issues make the Kelly criterion attractive, in that facing a large number of advantageous bets, I believe it roughly:
maximises the median of the distribution of your future bankroll
minimises the expected time until you achieve a target bankroll level
though it can lead to painful volatility in your bankroll and depends on you accurately assessing the advantageousness of bets; both of these can be addressed by so-called "fractional Kelly betting" at the cost of possibly not taking sufficient advantage of profitable opportunities
answered Jan 1 at 3:18
HenryHenry
99.3k479165
$endgroup$
Two other issues make the Kelly criterion attractive, in that facing a large number of advantageous bets, I believe it roughly:
maximises the median of the distribution of your future bankroll
minimises the expected time until you achieve a target bankroll level
though it can lead to painful volatility in your bankroll and depends on you accurately assessing the advantageousness of bets; both of these can be addressed by so-called "fractional Kelly betting" at the cost of possibly not taking sufficient advantage of profitable opportunities
answered Jan 1 at 3:18
HenryHenry
99.3k479165
answered Jan 1 at 3:18
HenryHenry
99.3k479165
answered Jan 1 at 3:18
HenryHenry
99.3k479165
answered Jan 1 at 3:18
HenryHenry
99.3k479165
99.3k479165
add a comment |
add a comment |
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