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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 […] 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. You’ll get a chart that looks like this: It’s the CBOE’s S&P 500 Implied Correlation Index — based on options expiring in January 2011. It’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 Must-see motivational speaker video. Even more must-see video on the European bail-out. I love their explanation for why America is a better bet. |
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