Thank you for this explanation which I could actually follow. But it brings up a question: in your example, if you could only afford to lose the amount OVER ($2895) the Kelly bankroll, then what's the other $17105 for? Are we never to risk the bankroll portion?
----- Reply message -----
From: "nightoftheiguana2000@yahoo.com [vpFREE]" <vpFREE@yahoogroups.com>
To: <vpFREE@yahoogroups.com>
Subject: [vpFREE] Re: Bankroll question
Date: Thu, Jan 22, 2015 12:35 PM
vtroy216 asked: "It would probably be an interesting poll about how many of us use risk-of-ruin calculations and concerns when we go on a trip or casino visits, vs. how many of us just play with whatever we can afford to lose."
I play with whatever I can afford to lose, but I use the Kelly criterion to tell me what I can afford to lose. If you know the betsize, edge, and variance of a gamble or "investment", you can estimate the Kelly bankroll in your head (betsize x variance / edge). That's the reserve, you can leave that in the bank, any EXTRA amount you can afford to gamble with. And that's the bleeding edge, if you want to be more conservative, double that amount.
Example: I find a dollar FPDW machine. Sweet. Estimated Kelly bankroll is $5 x 26 / .0076 = $17,105. My current bankroll is $20,000, the good news is I can play. I take $2,895 (the amount my bankroll is over the Kelly bankroll) out in cash and start playing, unfortunately my luck is bad and after playing for some time the $2,895 (the amount I can afford to lose from my bankroll) is gone. I stop, I can no longer afford to play. Maybe I can make some money selling this machine to someone? Or work some deal with someone who has a bigger bankroll?
If you want to be slightly more sophisticated, you can calculate Kelly numbers in advance, for FPDW the Kelly number is 2925, multiply by the betsize, in this case $5, to get the more accurate $14,625. Jazbo has some more numbers and a calculator here:
Kelly Betting for Video Poker http://www.jazbo.com/videopoker/kelly.html
Kelly Betting for Video Poker http://www.jazbo.com/videopoker/kelly.html 9/6 DB/DJ 9/6 Double Bonus with Double Jackpot. This game is appearing in Atlantic City. It is slightly positive even without cash back, but beware the variance! Pick'em
View on www.jazbo.com http://www.jazbo.com/videopoker/kelly.html
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Posted by: "=?utf-8?B?dnRyb3kyMTZAeWFob28uY29t?=" <vtroy216@yahoo.com>
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