Non-normal Kelly's criteria

Discussion in 'Risk Management' started by GordonHui, Aug 16, 2020.

  1. How to obtain the formula for Kelly's criteria with skew? Derivation is perfered.
     
  2. panzerman

    panzerman

    You shouldn't worry about skew or kurtosis in your Kelly calculation. In fact you should probably use fractional Kelly and just stick with a normality assumption.
     
    trader221 and guru like this.
  3. ironchef

    ironchef

    Really? You want derivation? Here is one.

    https://sites.math.washington.edu/~morrow/336_10/papers/jane.pdf

    If you want to include skew and kurtosis, just replace the Gaussian with your own favorite distribution that has skew and kurtosis.

    But don't ask me because I am math challenged and only care about the answer.
     
  4. tdazio

    tdazio

  5. Do any of you actually have practical success with Kelly? R Vince says it is not the right model for trading and optimal if is better for trading. I would be interested in your thoughts...
     
  6. ironchef

    ironchef

    Ed Thorp.
     
  7. Thanks for this!