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Kelly criterion revisited: optimal bets

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Abstract.

Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows for an interesting financial interpretation of the Boltzmann/Shannon entropy. A “no-go” hypothesis for big investors is suggested.

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References

  • H. Busemann, P.J. Kelly, Projective Geometry and Projective Metrics (Academic Press, New York, 1953)

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Authors and Affiliations

  1. Institute of Mathematics, University of Białystok, Lipowa 41, Pl, 15424, Białystok, Poland

    E. W. Piotrowski & M. Schroeder

Authors
  1. E. W. Piotrowski
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  2. M. Schroeder
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Correspondence to E. W. Piotrowski.

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Piotrowski, E., Schroeder, M. Kelly criterion revisited: optimal bets. Eur. Phys. J. B 57, 201–203 (2007). https://doi.org/10.1140/epjb/e2007-00126-3

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  • DOI: https://doi.org/10.1140/epjb/e2007-00126-3

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