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Kelly Criterion Revisited: Optimal Bets

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Author Info
Edward W. Piotrowski ()
Malgorzata Schroeder ()

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Abstract

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 for an interesting financial interpretation of the Boltzmann/Shannon entropy. A ``no-go'' hypothesis for big investors is suggested.

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File URL: http://alpha.uwb.edu.pl/ep/RePEc/sla/eakjkl/24.pdf
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Paper provided by University of Bialtystok, Department of Theoretical Physics in its series Departmental Working Papers with number 24.

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Handle: RePEc:sla:eakjkl:24

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  1. Edward W. Piotrowski & Jan Sladkowski & Anna Szczypinska, . "Reinforcement Learning in Market Games," Departmental Working Papers 30, University of Bialtystok, Department of Theoretical Physics. [Downloadable!]
  2. Edward W. Piotrowski & Jerzy Luczka, . "The relativistic velocity addition law optimizes a forecast gambler's profit," Departmental Working Papers 31, University of Bialtystok, Department of Theoretical Physics. [Downloadable!]
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This page was last updated on 2009-11-8.

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