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Kelly Criterion stake given outstanding exposure

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  • 16-05-2014 1:17am
    #1
    NewApproach
    Registered Users Posts: 2,185 ✭✭✭


    How do you calculate optimal stake under Kelly criterion when you already have exposure at a different price? Assume the following, and lets say for arguments sake that we are discussing a horse's chance in a certain race.

    Bankroll: €100.
    Initial Price: 9/1 (i.e. 10%)
    Our estimate of chance: 14%
    Kelly Stake: €4.44

    Let's say certain influences have changed and we now consider that this selection has a 30% chance of winning, and his price has adjusted to 4/1 (i.e. 20%).

    How do we calculate what the optimal additional stake now is at the revised price, taking into account our outstanding exposure on the same selection? I presume the perceived edge which provided for the original bet needs to be accounted for.

    Any suggestions would be great!


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    #2
    diomed
    Closed Accounts Posts: 4,744 ✭✭✭diomed


    I estimate about 12% of your remaining bank at the new odds. Ignore the previous bet.
    I never use the Kelly Criterion.


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    #3
    NewApproach
    Registered Users Posts: 2,185 ✭✭✭NewApproach


    You can't ignore the previous bet


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    #4
    paulo6891
    Registered Users Posts: 352 ✭✭paulo6891


    Do some monte carlo simulations to find out the optimal solution. (If you don't know how to do them you arguably shouldn't be using kelly's staking method.)


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