How much should you risk?

FYI: I've posted the short C++ code that I had hacked quickly for finding the solution here:
http://www.elitetrader.com/et/index...raction-of-account-value-short-c-code.297591/

 

i sat down, consulted the Kelly criterion literature on line, and figured out how to solve the problem correctly from first principles. Piece of cake!

Would appreciate another puzzle, kut2k2, to test my new found knowledge.

 

Before I do that, what is your current answer to the puzzle in the OP? Thanks.

 

i obtain the same curve as botpro, so 78% is my answer.

 

So you're just using botpro's method. No need for me to dream up new puzzles for that, you can do so just as well as I or anybody else.

 

I'm not using botpro's method. I don't even know how he came up with his answer (I don't know to to code in c+ or anything else).

I derived my answer from looking at what Kelly is all about i.e. maximising the rate of growth with respect to a variable. Create an function. You then make a mathematical transformation of the function to make it easier to handle. Then you could try taking the first derivative of the function and setting it to zero and solve...alternatively just plot the function to derive the answer.

 

OK, one final puzzle from me:

There is a 90% chance that you win 25% of your bet ;
There is a 9.9% chance that you lose 5% of your bet ;
There is a 0.1% chance that you lose 100% of your bet.

What is your best betting fraction of your account?

 

99.4%

 

Ditto for me.

GAT

 

is there a closed solution for this? or do you montecarlo it or build something like botpro?