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Perhaps the most famous proponent of the Kelly Criterion is Edward Thorp. He founded the M.I.T. Blackjack Club, published various papers on gambling and investing, and became both a professor of mathematics and a billionaire investor. The Kelly Criterion played a key role in most of these; he dubbed it “Fortune’s Formula”. Thorp has authored […] I changed my mind; I want to stick with my toy example just a little bit longer. Let’s change the game slightly. Instead of bringing your own bankroll, Casino Nemo gives you $1 with which to play. You can play as many rounds as you like, compounding your gains from round to round… For as […] Let me continue with my example from Part 2. Yes, this example is a toy. But I believe that studying simple cases can help to understand complex ones. To recap, we have a game where you place a bet that you will win with probability \(p = \frac{2}{3}\) and that pays off 1:1. You have […] Welcome to Casino Nemo! You will like it here. We have this game where you place a bet and then we roll a fair six-sided die. If it lands 1 or 2, we keep your bet; if it lands 3 through 6, you get back your bet times two (1:1 payoff). As I said, you […] Last week, on PredictIt, the “Yes” contract for Amy Barrett becoming Trump’s Supreme Court nominee was trading at an implied probability of 40%. Based on my own reasoning, I estimated her chances at closer to 20%. Put another way, the “No” contract was offered for $0.60, while I thought it was worth $0.80. So I […] Lots of people are saying that massive contango in the Bitcoin futures is no surprise, because the contracts are cash settled. For example: “If you’re doing a cash-settled future, it’s just a bet,” said Aaron Brown, a former managing director at quant hedge fund AQR Capital Management who invests in the cryptocurrency and writes […] I hope I am not too immodest if I feel like my Bitcoin series has aged pretty well. I do have a long-ish follow-up post percolating in my head, but I need some time to pull it together and research a few questions first (e.g. did anyone at the FT ever manage to make a […] It has been a volatile month for the world’s most popular experimental currency: As you can see(1), the U.S. dollar — measured in milli-bitcoins — has been highly unstable. In Felix Salmon’s words: [The dollar] is clearly not an effective store of wealth — just look at how quickly that wealth can be evaporated. […] I have a question. But first, here is a good round-up from the NYT: After a hastily convened evening meeting to assess the situation, the group of 17 finance ministers whose countries use the euro issued a statement declaring themselves “conditionally satisfied†with most of the new proposal, which the so-called troika of lenders — […] From the ECB: The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013. Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks. Cyprus’s banks are […] |
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