Kaufmann Risk of Ruin

Discussion in 'Risk Management' started by virtualmoney, Nov 8, 2011.

  1. =======================
    V money
    Thanks but no thanks on any kind of roulette:D

    Coin flip probability is helpful, for sure , i clicked many of your links..
    But in order to more resemble trading;
    a] add a comission to each flip,
    Z ]use silver & or gold coins.

    My comments are educational only;
    i prefer to trend trade cash silver ..... rather than flip silver coins.
    Hope this helps.
     
    #51     Nov 17, 2011
  2. kut2k2

    kut2k2

    #52     Nov 22, 2011
  3. tim888

    tim888

    That forum is dead. There are only a handfull of active mebers each pretending to be a quant expert but that's about it. No substance at all.

    The first guy who replied although he claimed statement 1 was not true he finally agreed some version of it is true.

    The second poster agreed with statement 2.

    The third poster mentioned Kelly for statement 1, showing he didn't understand the problem. Statement 2 he did not even understand.

    Do you understand what you read after all? I'm starting just like DontMissThe Bus to think you are a crank or something.

    The questions intrabill asked are too serious for you to think you have a solution.
     
    #53     Nov 22, 2011
  4. kut2k2

    kut2k2

    That's just your uninformed opinion. I see plenty of activity and substance.
    LIAR! What he stated was that some weird version of gambler's ruin was true, not that statement 1 was true.
    So what? My post had nothing to do with statement 2. Having trouble keeping up, I see.
    Kelly proves that statement 1 is wrong. If you truly understood the problem, you'd know that.
    My thought about YOU exactly.

    If you can prove statement 1 without resorting to any of the nonsense "proofs" posted elsewhere, do so. Otherwise you're just blowing smoke like Bill and ShortBus.
     
    #54     Nov 22, 2011
  5. Visaria

    Visaria

    This looks wrong to me.

    Consider 1 trial only. The prob of the event not occuring is (1-p)^1, not p^1 .

    If i'm right, i just invalidated Bill's entire arguments.

    :cool:
     
    #55     Nov 22, 2011
  6. kut2k2

    kut2k2

    You're right. See how easy it is to make these math dilettantes look as foolish as they truly are? :D
     
    #56     Nov 22, 2011
  7. Ideally if it is always trending smoothly, there isnt much need to trade & pay comission
    http://www.elitetrader.com/vb/showthread.php?threadid=231347
    but market behaviour changes frequently which is why performance continuity & price action are different topics which some cannot differentiate...but what do I know,I do not handle...
    B i l l i o n s of dollars.:p
     
    #57     Nov 22, 2011
  8. Obviously I wanted to say that p is the probability for the event not occurring.

    Regardless, if (1-p) is the probability ruin does not occur, (1-p) ^n --> 0 as n --> inf, for (1-p) < 1

    Then, the probability of the event occurring goes to 1. Ruin is certain as time grows large and this is a very simple proof.

    Are you happy now? Thanks for spotting this. You got the crank Kubkatuka2 all excited for a moment. he is jumbing like a monkey all over the place.
     
    #58     Nov 23, 2011
  9. Visaria

    Visaria

    I read the thread and wrote the comment above near midnight after a drink (or two).

    Bill is right in that, given enough trials (infinite) , the probability of ruin tends to 1 i.e. certainty. At some point, you would have a streak of losses that would wipe you out.

    In practical terms however, no one is going to be doing an infinite number of trades in an infinite time period.
     
    #59     Nov 23, 2011
  10. Visaria, it doesn't have to be an infinite time. It depends on the path and how fast that makes the probability of ruin converge to 1. For some systems and markets, it may take only 1 year. It also depends on commissions. I found this example in the price action lab blog. It worths reading it. It shows how ruin depends on starting capital and commission for a simple system with positive expectancy in theory: http://tinyurl.com/cn4fa8o
     
    #60     Nov 23, 2011