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Example of the optimal Kelly betting fraction, versus expected return of other fractional bets. In probability theory, the Kelly criterion (or Kelly strategy or Kelly bet) is a formula for sizing a sequence of bets by maximizing the long-term expected value of the logarithm of wealth, which is equivalent to maximizing the long-term expected geometric growth rate.
John Larry Kelly Jr. (December 26, 1923 – March 18, 1965), was an American scientist who worked at Bell Labs. From a "system he'd developed to analyze information transmitted over networks," from Claude Shannon's earlier work on information theory , he is best known for his 1956 work in creating the Kelly criterion formula.
In probability theory, Proebsting's paradox is an argument that appears to show that the Kelly criterion can lead to ruin. Although it can be resolved mathematically, it raises some interesting issues about the practical application of Kelly, especially in investing. It was named and first discussed by Edward O. Thorp in 2008. [1]
Kelly betting or proportional betting is an application of information theory to investing and gambling. Its discoverer was John Larry Kelly, Jr. Part of Kelly's insight was to have the gambler maximize the expectation of the logarithm of his capital, rather than the expected profit from each bet. This is important, since in the latter case ...
In Kelly's paper the thing he refers to as a "criterion" is the idea that at every bet the gambler should maximise the expected value of the logarithm of their capital. I think this is probably what is meant by "Kelly criterion" -- which means that the Kelly criterion is not in fact a formula at all.
This page was last edited on 22 August 2009, at 00:32 (UTC).; Text is available under the Creative Commons Attribution-ShareAlike 4.0 License; additional terms may ...
This page was last edited on 2 February 2024, at 10:09 (UTC).; Text is available under the Creative Commons Attribution-ShareAlike 4.0 License; additional terms may apply.
Berlekamp was born in Dover, Ohio.His family moved to Northern Kentucky, where from 1954 Berlekamp attended Fort Thomas Highlands High School in Fort Thomas, Kentucky.He was elected class president and joined the swim team which practiced naked at the local YMCA pool; Berlekamp was the slowest swimmer but chose swimming because of the low level of competition compared to other sports. [3]