Awareness of Crash Risk Improves Kelly Strategies in Simulated Financial Time Series

@article{Gerlach2020AwarenessOC,
  title={Awareness of Crash Risk Improves Kelly Strategies in Simulated Financial Time Series},
  author={J. C. Gerlach and Jerome Kreuser and Didier Sornette},
  journal={Decision-Making \& Management Science eJournal},
  year={2020}
}
We simulate a simplified version of the price process including bubbles and crashes proposed in Kreuser and Sornette (2018). The price process is defined as a geometric random walk combined with jumps modelled by separate, discrete distributions associated with positive (and negative) bubbles. The key ingredient of the model is to assume that the sizes of the jumps are proportional to the bubble size. Thus, the jumps tend to efficiently bring back excess bubble prices close to a normal or… 
1 Citations

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