Tagged Questions

The kelly-criterion is a risk management strategy (or wagering system) providing an optimal risk apportionment system that relies on having 2 calculated probabilities.

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Why maximize expected growth rate?

It seems to me that the optimality of the Kelly Criterion relies on the assumption that it is in an investor's best interest to maximize his portfolio's expected growth rate. Why would he care what ...
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Kelly Capital Growth Investment Strategy (Example in R)

In the paper Response to Paul A Samuelson letters and papers onthe Kelly Capital Growth Investment Strategy pages 5 and 6 Dr William T Ziemba, gives a praticle example on Kelly Growth. I’m trying to ...
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Capital Allocation for Portfolio of Multi-Strategy and Multi-Instrument

I would like to know if there is a way (or theory) to manage a multi-strategy, multi-instruments portfolio that would calculate the optimal weight to allocate capital for each combination of strategy ...
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Kelly criterion and Sharpe ratio

Whats the relationship between the Kelly criterion and the Sharpe ratio? $$f=\frac{p(b+1)-1}{b}$$ where $f$ is a percentage of how much capital to place on a bet, $p$ is the probability of ...
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Absolute Dollar Form Of Kelly Criterion

Is there a absolute dollar form of the Kelly equation $f=\frac{m}{s^2}$? (i.e. one that does not use percent returns).
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How to apply the Kelly criterion when expected return may be negative?

My concern is how to handle a negative value for the Kelly formula. Even when you have a system that has positive expectancy, you can (and usually will) sustain a number of losses, sometimes ...
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How to optimally allocate capital among trading strategies?

I'm trying to find an optimal way to allocate capital among trading strategies. "Quantitative Trading" by Ernie Chan claims on page 97 that the optimal fraction of capital to allocate to a given ...