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 sixsided 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 […]
My day job leaves little time for blogging, but I want to get this down before the whole topic is history.
The Brexit referendum begins in just a few hours. The Leave side was showing momentum prior to the murder of Jo Cox, but since then, pretty much all polls have been stuck at “too […]
Impossibility proofs have always fascinated me. Solving a problem is one thing. Failing to solve a problem is another. But there is something really special about proving nobody can solve it, ever, even if they are smarter than you. (Guess where I am going with this.)
The Delian problem is provably unsolvable. This was not […]
There is a series of posts forming in my head. I have no unifying theme nor particular audience in mind, so they will be even more rambling and incoherent than usual. Also I plan to have a drink or two before each just to complete the effect. You have been warned.
Let’s play a little […]
Tracy Alloway points us to another fun indicator:
Type JCJ GP on your Bloomberg.
Youâ€™ll get a chart that looks like this:
Itâ€™s the CBOEâ€™s S&P 500 Implied Correlation Index â€” based on options expiring in January 2011. Itâ€™s a basic measure of the correlation of stocks within the S&P 500, and you can see […]
Hugh Hendry May 2010 commentary. He seems to be expecting an event in the Japanese bond markets.
R.I.P., Martin Gardner
Mustsee motivational speaker video.
Even more mustsee video on the European bailout. I love their explanation for why America is a better bet.

