EXPOSITION OF A NEW THEORY ON THE MEASUREMENT OF RISK

Daniel Bernoulli

Chapter 2 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 11-24 from World Scientific Publishing Co. Pte. Ltd.

Abstract: EVER SINCE mathematicians first began to study the measurement of risk there has been general agreement on the following proposition: Expected values are computed by multiplying each possible gain by the number of ways in which it can occur, and then dividing the sum of these products by the total number of possible cases where, in this theory, the consideration of cases which are all of the same probability is insisted upon. If this rule be accepted, what remains to be done within the framework of this theory amounts to the enumeration of all alternatives, their breakdown into equi-probable cases and, finally, their insertion into corresponding classifications…

Keywords: Kelly Criterion; Dynamic Investment Analysis; Capital Growth Theory; Sports Betting; Hedge Fund Strategies; Speculative Investing; Fortune 's Formula (search for similar items in EconPapers)
Date: 2011
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