4 ms·

For continuous payoffs, Kelly sizing reduces to the square of Sharpe ratio.

• howlin 6y ago
  Kind of. Most simple models for continuous payoffs will assign a nonzero probability to losing all your wealth or your wealth going negative. The Kelly bet size for any thing with a nonzero chance of "ruin" is zero.
  • dcolkitt 6y ago
    Sharpe is typically calculated on log returns. Price going to zero would weigh as negative infinity in log return space. Therefore Sharpe would also prescribe zero bet on finite chance of ruin.
    • kgwgk 6y ago
      A proper Sharpe ratio is calculated with arithmetic returns.
• fighterpilot 6y ago
  Where did you see this?