Re:Kelly Criterion – how to calculate optimal bet sizes
by kqr on Thursday June 10, 2021 @01:37AM
(#27457105)
Technically the Kelly criterion suggests you should take this bet if your wealth is greater than $1.23, so it does depend on your current wealth.
However, this might still look dumb, and it's because my calculation assumes you could pick a smaller stake for the same bet, which isn't necessarily the case. If you can't, the calculation gets a little bit more complicated, but sure, the Kelly criterion can deal with that too.
Re:Kelly Criterion – how to calculate optimal bet sizes
by LudwigNagasena on Thursday June 10, 2021 @01:53AM
(#27457222)
According to the assumptions behind the Kelly criterion (maximizing long-term growth rate) you should always take the bet. Kelly criterion can’t be applied here because we have a different setup (you can’t choose your bet size), that’s my entire point!
What if each week you can bet $1 that in 50% of cases will triple your bet and in 50% of cases will give you $0? According to the log utility whether you should bet depends on your current wealth. According to the assumptions behind the Kelly criterion you should take the bet every week.