Kelly Criterion Extension: Advanced Gambling Strategy

Song-Kyoo (Amang) Kim ()
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Song-Kyoo (Amang) Kim: Faculty of Applied Sciences, Macao Polytechnic University, R. de Luis Gonzaga Gomes, Macao, China

Mathematics, 2024, vol. 12, issue 11, 1-9

Abstract: This article introduces an innovative extension of the Kelly criterion, which has traditionally been used in gambling, sports wagering, and investment contexts. The Kelly criterion extension (KCE) refines the traditional capital growth function to better suit dynamic market conditions. The KCE improves the traditional approach to accommodate the complexities of financial markets, particularly in stock and commodity trading. This innovative method focuses on crafting strategies based on market conditions and player actions rather than direct asset investments, which enhances its practical application by minimizing risks associated with volatile investments. This paper is structured to first outline the foundational concepts of the Kelly criterion, followed by a detailed presentation of the KCE and its advantages in practical scenarios, including a case study on its application to blackjack strategy optimization. The mathematical framework and real-world applicability of the KCE are thoroughly discussed, demonstrating its potential to bridge the gap between theoretical finance and actual trading outcomes.

Keywords: Kelly criterion; money management; multivariate portfolios; fractional Kelly strategies; gambling strategy; probability-based betting (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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