A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Two methods extend multivariate Kelly optimization to large problem sizes.
Kelly betting is a prescription for optimal resource allocation among a set of gambles which are typically repeated in an independent and identically distributed manner. In this setting, there is a large body of literature which includes arguments that the theory often leads to bets which are "too aggressive" with resp…
Study evaluates three position sizing methods for put-writing on S&P 500 Index options.
Solves the Sleeping Beauty problem as a 'thirder' using the Kelly Criterion.
Prompted by a recent experiment by Victor Haghani and Richard Dewey, this note generalises the Kelly strategy (optimal for simple investment games with log utility) to a large class of practical utility functions and including the effect of extraneous wealth. A counterintuitive result is proved : for any continuous, co…
We determine Kelly criterion for a game with variable pay-off. The Kelly fraction satisfies a fundamental integral equation and is smaller than the classical Kelly fraction for the same game with the constant average pay-off.
Kelly investing improved with options to reduce estimation risk.
A new portfolio model improves on Kelly's by accounting for estimation error.
We develop a general framework for applying the Kelly criterion to stock markets. By supplying an arbitrary probability distribution modeling the future price movement of a set of stocks, the Kelly fraction for investing each stock can be calculated by inverting a matrix involving only first and second moments. The fra…
We investigate the use of Kelly's strategy in the construction of an optimal portfolio of assets. For lognormally distributed asset returns, we derive approximate analytical results for the optimal investment fractions in various settings. We show that when mean returns and volatilities of the assets are small and ther…
Extends Kelly Criterion to more complex betting scenarios.
The Kelly rule fails to maximize growth in a time-changed return setting.
Paper introduces new risk measures for Kelly criterion.
Financial markets, with their vast range of different investment opportunities, can be seen as a system of many different simultaneous games with diverse and often unknown levels of risk and reward. We introduce generalizations to the classic Kelly investment game [Kelly (1956)] that incorporates these features, and us…
Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows for an interesting financial interpretation of the Boltzmann/Shannon entropy. A…
Paper approximates Kelly betting for wealth growth.
Mathematical model for focused investing reduces diversification risks.
This paper extends Kelly Criterion to include rebalancing frequency for optimal portfolio selection.
Two entropy measures quantify suboptimal portfolio performance.
A new factor analysis method using ICA reduces portfolio concentration and diversifies excess kurtosis.
Investment strategy using fractional Kelly portfolios for better growth expectations.
Investing is a compression problem, maximizing growth by minimizing divergence.
Investigates sports betting strategies using modern portfolio theory and Kelly criterion.
Optimizes financial decisions with illiquid assets using Kelly criterion.
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization problems in the financial and automation literature. This paper will show how Kelly'…
The Kelly Criterion is applied to prediction markets to analyze risk and return.
Optimal Kelly strategy for multi-outcome parlay bets proven using implicit cash approach.
Forecast-to-fill strategy generates durable alpha in gold futures.
The focal point of this paper is the so-called Kelly Criterion, a prescription for optimal resource allocation among a set of gambles which are repeated over time. The criterion calls for maximization of the expected value of the logarithmic growth of wealth. While significant literature exists providing the rationale …
Research proposes a decentralized invoice discounting system using Kelly criterion.
In evaluating prediction markets (and other crowd-prediction mechanisms), investigators have repeatedly observed a so-called "wisdom of crowds" effect, which roughly says that the average of participants performs much better than the average participant. The market price---an average or at least aggregate of traders' b…
Quantum strategy optimizes wealth growth in a double-or-nothing game.
I derive practical formulas for optimal arrangements between sophisticated stock market investors (namely, continuous-time Kelly gamblers or, more generally, CRRA investors) and the brokers who lend them cash for leveraged bets on a high Sharpe asset (i.e. the market portfolio). Rather than, say, the broker posting a m…
Algorithm beats best constant rebalancing portfolio in long-term investment.
We consider the classic Kelly gambling problem with general distribution of outcomes, and an additional risk constraint that limits the probability of a drawdown of wealth to a given undesirable level. We develop a bound on the drawdown probability; using this bound instead of the original risk constraint yields a conv…
Bitcoin treasury companies leverage stock to grow, using advanced statistical methods.
A quantum memory model for Kelly betting with amplified or attenuated outcomes.
In this paper, we study the Kelly criterion in the continuous time framework building on the work of E.O. Thorp and others. The existence of an optimal strategy is proven in a general setting and the corresponding optimal wealth process is found. A simple formula is provided for calculating the optimal portfolio for a …
From the Hamilton-Jacobi-Bellman equation for the value function we derive a non-linear partial differential equation for the optimal portfolio strategy (the dynamic control). The equation is general in the sense that it does not depend on the terminal utility and provides additional analytical insight for some optimal…
I unravel the basic long run dynamics of the broker call money market, which is the pile of cash that funds margin loans to retail clients (read: continuous time Kelly gamblers). Call money is assumed to supply itself perfectly inelastically, and to continuously reinvest all principal and interest. I show that the rela…
We investigate the position of the Buchen-Kelly density in a family of entropy maximising densities which all match European call option prices for a given maturity observed in the market. Using the Legendre transform which links the entropy function and the cumulant generating function, we show that it is both the uni…
A new method for optimizing stakes in a single event with multiple outcomes.
Study risk-constrained Kelly optimization for mutually exclusive outcomes, proving support invariance and developing a structured algorithm.
Risk and uncertainty will always be a matter of experience, luck, skills, and modelling. Leverage is another concept, which is critical for the investor decisions and results. Adaptive skills and quantitative probabilistic methods need to be used in successful management of risk, uncertainty and leverage. The author ex…
We study the problem of optimizing the betting frequency in a dynamic game setting using Kelly's celebrated expected logarithmic growth criterion as the performance metric. The game is defined by a sequence of bets with independent and identically distributed returns X(k). The bettor selects the fraction of wealth K wa…
Maximizes stock portfolio predictability using machine learning.
Generalized knot groups were introduced independently by Kelly (1991) and Wada (1992). We prove that determines the unoriented knot type and sketch a proof of the same for for .
We prove that Pareto theory of circulation of elites results from our wealth evolution model, Kelly criterion for optimal betting and Keynes' observation of "animal spirits" that drive the economy and cause that human financial decisions are prone to excess risk-taking.