I don't understand the difference between the "certainty equivalent"
and the Kelly Criterion. Just based on the example that
nightoftheiguana did, I suspect the "certainty equivalent" is an
approximation to the Kelly Criterion. The principle in deciding which
hold to make and deciding which game to play is the same, so the
correct decision for each hand should not necessarily still be the
same. Theoretically, just as each game as a whole should be analyzed
from a "Kelly" point of view, so should each strategy decision.
Sometimes, there are hands for which the hold with the highest
expected value takes a bigger bankroll to make than the game as a
whole takes to play.
>I understand (conceptually, if not mathematically) the Kelly principle, but have not heard about "certainty equivalent" before. Can someone explain that to me (again, conceptually). If one's bankroll is NOT large enough to properly qualify as an adequate "Kelly" bankroll, I understand that you have less than optimal chance of doubling bankroll, but does that situation also change the way you should play, or are plays of higher expectation still preferred over those of lower expectation in every situation?
>
>Instinctively, it seems to me that even if you are playing (and I understand that long-term, it's not "correct" play) above your bankroll, that the correct decision for each hand should still be the same.
>
>Thanks!
>
>--BG
>===============
>
>1.1. Re: Proper hold JOB 3 card royal vs. 4 card flush?????
> Posted by: "007" 007@embarqmail.com mdmgyn
> Date: Wed Sep 17, 2014 12:29 am ((PDT))
>
>nightoftheiguana2000@yahoo.com wrote:
>
>>In case anyone wants to double check the numbers:
>>
>>hand: AJT9s8o
>>
>>hold AJTs:
>>outs: 1rf,35fl,15st,9-3k,27-2p,240hp
>>EV=1.2867715 VAR=592.17308
>>
>>hold AJT9s:
>>outs: 9fl,6hp
>>EV=1.2765957 VAR=5.3915799
>>
>>Certainty Equivalent = EV - VAR/2xBankroll
>>
>>For Bankroll < 28,832 bets (about 36 royals), AJT9s has a higher Certainty Equivalent
>
>I compared the Kelly formulas and got 28,298 units as the bankroll
>that equates them.
Posted by: 007 <007@embarqmail.com>
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