Quote:
Originally Posted by curious
I always want risk of ruin to be 1%, I don't know how else to explain it. Some people have a larger tolerance for risk of ruin, I don't. To be clear what I mean when I use the term risk of ruin,the risk that the bankroll will become zero.
Expected value takes into account the odds, so I really don't know what you are talking about. Expected value is simply "If I bet X, the expectation is that I will win Y". The odds have to be a part of the equation, otherwise how will you know what you expect the win to be? Kelly tells me how much of my bankroll to bet given an expected value and a risk of ruin that I am willing to tolerate. It really isn't that difficult.
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While what you're describing may well be a staking strategy with which you're entirely comfortable, it is most decidedly
not Kelly.
The risk-of-ruin with Kelly is zero. This is true of any percentage staking strategy.
The Kelly stake is a function of odds offered and a function of expectations (which as you've correctly pointed out is itself a function of odds offered). The correct single-bet Kelly stake as a function of edge and decimal odds is:
full Kelly stake = edge / (odds - 1)
and as a function of win probability and odds is:
full Kelly stake = (prob * odds - 1) / (odds - 1)
If you haven't done so already you might want to check out:
Expected Value vs Expected Growth (Kelly criterion Part I) and
Maximizing Expected Growth (Kelly criterion Part II)