Generalizing the Kelly strategy

28 Nov 2016Arjun Viswanathan

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, concave, differentiable utility function, the optimal choice at every point depends only on the probability of reaching that point... (read more)

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