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Kelly criterion and fractional Kelly strategy for non-mutually exclusive bets

Author

Listed:
  • Jacot Benjamin P.
  • Mochkovitch Paul V.

    (Independent Researcher, Paris, France)

Abstract

This paper examines how the Kelly criterion, a strategy for maximizing the expected log-growth of capital through informed betting, can be applied to non-mutually exclusive bets. These are bets where there is no one-to-one correspondence between the bets and the possible outcomes of the game. This type of situation is common in horse racing, where multiple types of bets are available for a single race. The paper begins by providing a theoretical overview of the Kelly betting strategy and then discusses how it can be extended to non-mutually exclusive bets. A new formulation of the fractional Kelly strategy, which involves betting a fixed fraction of the amount suggested by the Kelly criterion, is also presented for this type of scenario.

Suggested Citation

  • Jacot Benjamin P. & Mochkovitch Paul V., 2023. "Kelly criterion and fractional Kelly strategy for non-mutually exclusive bets," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 19(1), pages 37-42, March.
    • Handle: RePEc:bpj:jqsprt:v:19:y:2023:i:1:p:37-42:n:6
    DOI: 10.1515/jqas-2020-0122
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