Just a couple of (perhaps obvious) points from a practitioner of both gambling and quant finance:
1. I never cared for ramsey's quote. Every gambler knows that u always let the other guy propose the line. You never want to make the line (unless u know for sure what side they're betting :-)
2. Many practitioners opt for half-Kelly or more g…
Just a couple of (perhaps obvious) points from a practitioner of both gambling and quant finance:
1. I never cared for ramsey's quote. Every gambler knows that u always let the other guy propose the line. You never want to make the line (unless u know for sure what side they're betting :-)
2. Many practitioners opt for half-Kelly or more generally lambda-Kelly (lambda <1) which underscores the importance of risk control in decision making under uncertainty. While full Kelly is optimal in a decision theoretic context, real-world constraints generally make a more conservative approach appealing. Esp when dealing with things like haircuts, drawdowns, and bonuses. Bonuses are typically based on risk-adjusted performance, not just the raw returns. Lambda-Kelly leads to less volatile returns and will align better with firm's expectations.
Just a couple of (perhaps obvious) points from a practitioner of both gambling and quant finance:
1. I never cared for ramsey's quote. Every gambler knows that u always let the other guy propose the line. You never want to make the line (unless u know for sure what side they're betting :-)
2. Many practitioners opt for half-Kelly or more generally lambda-Kelly (lambda <1) which underscores the importance of risk control in decision making under uncertainty. While full Kelly is optimal in a decision theoretic context, real-world constraints generally make a more conservative approach appealing. Esp when dealing with things like haircuts, drawdowns, and bonuses. Bonuses are typically based on risk-adjusted performance, not just the raw returns. Lambda-Kelly leads to less volatile returns and will align better with firm's expectations.