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Kelly Criterion

Posted By: rambiz
Date: Friday, 10 May 2013, at 8:57 p.m.

In Response To: Mathematics of cube decisions relative to bankroll (Johan Segers)

From my understanding the only reason why the Kelly Criterion uses logarithm is that logarithm makes the calculations tractable, since it makes it possible to express logarithm of products as sum of logarithms.
There is no deeper truth behind using the logarithm in the context of bankroll management. The utility function is though convex, meaning it may help you a lot to win 1 million, when you are broke, but winning another 1 million, if you already posses 1 million isn't that appealing. In the second case, you might be more risk-averted and actually prefer to keep your money rather than take a chance on going broke.

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