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  • Good And Bad Properties Of The Kelly Criterion

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Good and bad properties of the Kelly criterion Leonard C. MacLean, Herbert Lamb Chair (Emeritus),School of Business, Dalhousie University, Halifax, NS Edward O. Thorp, E.O. Thorp and Associates, Newport.

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There are two basic components to the Kelly Criterion. The first is the win probability or the probability that any given trade will return a positive amount. The second is the win/loss ratio. This ratio is the total positive trade amounts divided by the total negative trade amounts.

So risk-taking—especially when the averages that are calculated across large populations—is not always rational. The Kelly criterion helps you avoid ruin. The number one way people get ruined in modern business is not by betting too much; it's by cutting corners and doing unethical or downright illegal things.

It is popular due to how it typically leads to higher wealth in the long run compared to other types of strategies. It is based on the formula k% = bp–q/b, with p and q equaling the probabilities of winning and losing, respectively.

Kelly Criterion Example in Sports Betting From a sports betting perspective, let's say a proposed wager has decimal odds of 3.00. The probability of winning is 0.40 making the probability of losing 0.60. Based on the formula, you should stake 0.2 (i.e. 20%) of your bankroll on the proposed wager.

A negative Kelly criterion means that the bet is not favored by the model and should be avoided.

What are the criticisms of the Kelly Criterion. The most common criticism of the Kelly Criterion in a betting context is that it fails to account for the volatility of the betting market and impact that variance can have on results.

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© Copyright 1997-2025
airSlate Legal Forms, Inc.
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Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232