I should probably clarify a bit: The notion of a "Certainty Equivalent" precedes Kelly, but the particular formula I was using (EV-VAR/2Bankroll) was derived by Kelly and is the CE under the Kelly system.
The Certainty Equivalent itself is relatively simple. Given a gamble, for what fixed amount would a contestant be indifferent between chosing the gamble or the fixed amount? That indifference point is also the game theoretical optimal point.
A maxEV player would be indifferent between a 50% chance at $100 or a fixed $50.
A Kelly player would consider the variance and their current bankroll. If the Kelly CE of the gamble exceeded $50, they would gamble.
__._,_.___
Posted by: nightoftheiguana2000@yahoo.com
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (6) |
Improvements in Yahoo Groups Search
Searching for new groups to join is easier than ever. We've honed our algorithm to bring you better search results based on relevance and activity. Try it today!
.
__,_._,___
