4 ms·
Not overspending out of your bankroll to take a wager, +EV or not, is pretty important. You probably wanna stick pretty near to (or beneath) the Kelly Criterion
by aston 18y ago
Not overspending out of your bankroll to take a wager, +EV or not, is pretty important. You probably wanna stick pretty near to (or beneath) the Kelly Criterion (http://en.wikipedia.org/wiki/Kelly_criterion http://en.wikipedia.org/wiki/Kelly_criterion). In the case of Aaron's game, you should only be willing to put down $9000 for that game if you have on the order of $8.9 million to gamble with.
- DaniFong 18y agoHow far beneath the Kelly criterion depends on the game. In gambling scenarios you can estimate the risk relatively easily. In investment scenarios, it's much harder, so there's an additional 'risk model uncertainty,' representing whether your risk model is off. In fact most investors famous for using the Kelly Criterion (Warren Buffett, Bill Gross - on Bonds) stick to the domains that they know.