The Kelly Criterion in Blackjack Sports Betting, and the Stock Market

@inproceedings{Thorp2011TheKC,
  title={The Kelly Criterion in Blackjack Sports Betting, and the Stock Market},
  author={Edward O. Thorp},
  year={2011}
}
The central problem for gamblers is to find positive expectation bets. But the gambler also needs to know how to manage his money, i.e., how much to bet. In the stock market (more inclusively, the securities markets) the problem is similar but more complex. The gambler, who is now an “investor”, looks for “excess risk adjusted return”. In both these settings, we explore the use of the Kelly criterion, which is to maximize the expected value of the logarithm of wealth (“maximize expected… CONTINUE READING

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