5 ms·

It's worth noting that for a finite number of bets (the number being known to the bettor) the Kelly Criterion is not the optimal strategy. Intuitively, the clos

It's worth noting that for a finite number of bets (the number being known to the bettor) the Kelly Criterion is not the optimal strategy. Intuitively, the closer you are to the end the less worried you should be about going bust (as you won't be missing out on more of these great odds). Gwern details this extensively here: https://www.gwern.net/Coin-flip https://www.gwern.net/Coin-flip well worth checking out.

ahstilde 9y ago
I'm unable to make heads-or-tails (har har har) of the Gwern blog post. Admittedly, my knowledge of statistics and machine-learning is lacking, but is there summary I can work backwards from?
- eru 9y ago
  The first grey box with text in it _is_ the summary. The actionable takeaway for me is to try and solve this problem with some machine learning approaches, since it's simple enough that we compare to exact solutions, but also interesting enough. The takeaway from a social point of view is that even people working in finance are not very good at playing these games individually. (The companies they work for might still be doing much better as a collaborative effort, and with more simulations and backtesting used.)
kartickv 9y ago
You should be worried about going bust, because life goes on after the exercise ends. Am I missing something?
- deleted 9y ago
  [deleted]
- jonahx 9y ago
  > Am I missing something? No, you're just bringing up a separate issue from the one implied by the parent. Your own risk tolerance, the values of your life, the opportunity costs outside of this one -- those are real complexities but we ignore them to answer a question about how best to maximize your bankroll within the current situation.
- darkerside 9y ago
  Think of it this way. With one final chance left, you should really bet 100% to maximize your expected value.
  - goldenkey 9y ago
    That seems contrary to the criterion... Expected value dismisses risk and the fact that once someone loses their money, it is much harder to gain it back. If you have 100 dollars..and you lose 50% of it on a fair coin bet, you now have $50. Say you play again..You win. Youll only have $75 ($50 times 150%.) Thats the basis of risk analysis. That losing and winning arent equal for finite bankrolls just because their probabilities are equal.
eru 9y ago
Thanks! Gwern's article is more interesting than the original submission.
fanzhang 9y ago
Generally the Kelly Criterion is the optimal play strategy for the entire game if and only if your utility in final payouts is the log of the payout. In the Haghani & Dewey 2016 experiment log utility is violated in two ways: - A $250 cap on payouts. - The fact that $250 payout to participants was on TOP of participant's current wealth, making utility approximately linear.

ahstilde 9y ago

I'm unable to make heads-or-tails (har har har) of the Gwern blog post. Admittedly, my knowledge of statistics and machine-learning is lacking, but is there summary I can work backwards from?

eru 9y ago
The first grey box with text in it _is_ the summary. The actionable takeaway for me is to try and solve this problem with some machine learning approaches, since it's simple enough that we compare to exact solutions, but also interesting enough. The takeaway from a social point of view is that even people working in finance are not very good at playing these games individually. (The companies they work for might still be doing much better as a collaborative effort, and with more simulations and backtesting used.)

kartickv 9y ago

You should be worried about going bust, because life goes on after the exercise ends. Am I missing something?

deleted 9y ago
[deleted]
jonahx 9y ago
> Am I missing something? No, you're just bringing up a separate issue from the one implied by the parent. Your own risk tolerance, the values of your life, the opportunity costs outside of this one -- those are real complexities but we ignore them to answer a question about how best to maximize your bankroll within the current situation.
darkerside 9y ago
Think of it this way. With one final chance left, you should really bet 100% to maximize your expected value.
- goldenkey 9y ago
  That seems contrary to the criterion... Expected value dismisses risk and the fact that once someone loses their money, it is much harder to gain it back. If you have 100 dollars..and you lose 50% of it on a fair coin bet, you now have $50. Say you play again..You win. Youll only have $75 ($50 times 150%.) Thats the basis of risk analysis. That losing and winning arent equal for finite bankrolls just because their probabilities are equal.

eru 9y ago

Thanks! Gwern's article is more interesting than the original submission.

fanzhang 9y ago

Generally the Kelly Criterion is the optimal play strategy for the entire game if and only if your utility in final payouts is the log of the payout. In the Haghani & Dewey 2016 experiment log utility is violated in two ways: - A $250 cap on payouts. - The fact that $250 payout to participants was on TOP of participant's current wealth, making utility approximately linear.