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 ...
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 ...
It is a not so well known fact that the Kelly criterion is only optimal in a nice and well-behaved Merton-world. It is far from optimal when things are getting non-(log)normal (i.e. more realistic!). ...