Kelly is similar to a simple calculation of expected value, but it has
the added benefit of incorporating the negative effect of fluctuation
on one's bankroll. It's similar in that it uses the same frequencies
and values, but it raises them to exponents instead of finds an
average. Ideally, this should replace expected value. Let's say
you'll win $102 or lose $100 on a coin flip. The calculation of
expected value is .5 x $102 - .5 x $100 = $1. The calculation of the
"Kelly Criterion," or the "logarithmic value" (I'm not sure I'm
expressing this accurately) is (((B + $102)/B) ^ .5) x (((B - $100)/B)
^ .5), B being one's bankroll. For a $10,000 bankroll, this comes to
1.000049. For a $5100 bankroll, it comes to exactly 1, which I think
means that the cost of the fluctuation offsets the expected value,
making the play equivalent to a break even proposition. After more
than 30 years, I'm still not completely sure how to use it or how
necessary it is. Your more nebulous approach of maximizing expected
value and being generally careful not to overbet matches mine fairly
well. The Kelly Criterion is the ideal way to quantify what
"overbetting" means.
vtroy21 wrote:
>Thank you. I took a look at it, and the most I understood was the link to a German translation of it all.
>Players actually USE these calculations, formulas, and whatevers when they play? I just play the games with positive paytables or the best available, and hope for good luck to be with me on my trip. I think anyone worried about going broke or that risk of ruin should not be playing in the first place.
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>----- Reply message -----
>From: "nightoftheiguana2000@yahoo.com [vpFREE]" <vpFREE@yahoogroups.com>
>To: <vpFREE@yahoogroups.com>
>Subject: [vpFREE] Re: Bankroll question
>Date: Wed, Jan 21, 2015 3:26 PM
>
>vtroy216 asked: "Could you please explain what you mean by Kelly?"
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>I think the wizard has a pretty good answer:
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>The Kelly Criterion - Wizard of Odds http://wizardofodds.com/gambling/kelly-criterion/
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>http://wizardofodds.com/gambling/kelly-criterion/
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>The Kelly Criterion - Wizard of Odds http://wizardofodds.com/gambling/kelly-criterion/ The Wizard of Odds on the Kelly Criterion.
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>View on wizardofo... http://wizardofodds.com/gambling/kelly-criterion/
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>Preview by Yahoo
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Posted by: 007 <007@embarqmail.com>
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