This discussion is already flawed because it didn't start optimally, then quickly descended into darkness with DarkyDog's effort.

It should have started with the Kelly Criterion, but I'm prepared to bet that none of you understand it. I didn't, until finding this over the weekend.

http://www.jimgeary.com/poker/letters/KELLY.HTM

All of you should read through it a number of times to milk as much wisdom from it as your mathematical capabilities can handle.

Using its definitions the optimal Bet to Bank ratio = Edge/Odds

So if you have a 35% Edge for a 7/4 shot. You should stake 35*4/7 = 20% of your Bank.

Despite the simplicity of the formula, to my amazement it gives the precise optimal figure.

So anyone who talks about "half Kelly" (whatever that is) is clearly deranged. Why would you replace the optimal stake with a sub-optimal one?

Before exploring some case studies found here about abuses of the Criterion, I need to introduce this formula for converting probabilty to odds (in this context)

Odds = (1+Edge)/Prob - 1

Also, I should add that as by definition Kelly needs edge, odds and a proper bank to work, and typically I have none of the 3, so I never use it.


[ This Message was edited by: jfc on 2003-10-21 14:17 ]