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Deriving the Kelly Criterion to Maximise Profits

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45 points obrhubr | 1 comments | 12 Oct 24 21:16 UTC | HN request time: 0.321s | source
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roenxi ◴[18 Oct 24 00:16 UTC] No.41875153[source]▶
A word that is good to know here is ergodic [0]. Which I must admit to not really understanding although it is something like the average system behaviour being equivalent to a typical point's behaviour. If a process is non-ergodic then E[X] is usually not as helpful as it seems in formulating a strategy.

[0] https://en.wikipedia.org/wiki/Ergodic_process

replies(3): >>41875266 #>>41875506 #>>41875584 #
1. sobriquet9 ◴[18 Oct 24 01:33 UTC] No.41875584[source]▶
An illustrative example to explain ergodicity. Consider the following game. Players start with $100. At every turn, a fair coin is flipped. If tails, the amount of player's money is increased by 50%. If heads, the amount of player's money is decreased by 40%. To play or not to play, that is the question.