Kelly criterion and fractional Kelly strategy for non-mutually exclusive bets

Jacot Benjamin P. () and Mochkovitch Paul V.
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Jacot Benjamin P.: Independent Researcher, Paris, France
Mochkovitch Paul V.: Independent Researcher, Paris, France

Journal of Quantitative Analysis in Sports, 2023, vol. 19, issue 1, 37-42

Abstract: This paper examines how the Kelly criterion, a strategy for maximizing the expected log-growth of capital through informed betting, can be applied to non-mutually exclusive bets. These are bets where there is no one-to-one correspondence between the bets and the possible outcomes of the game. This type of situation is common in horse racing, where multiple types of bets are available for a single race. The paper begins by providing a theoretical overview of the Kelly betting strategy and then discusses how it can be extended to non-mutually exclusive bets. A new formulation of the fractional Kelly strategy, which involves betting a fixed fraction of the amount suggested by the Kelly criterion, is also presented for this type of scenario.

Keywords: constrained programming; Kelly criterion; optimization; risk; sports (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/jqas-2020-0122

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