Application of the Kelly Criterion to Ornstein-Uhlenbeck Processes

Yingdong Lv and Bernhard K. Meister

Papers from arXiv.org

Abstract: In this paper, we study the Kelly criterion in the continuous time framework building on the work of E.O. Thorp and others. The existence of an optimal strategy is proven in a general setting and the corresponding optimal wealth process is found. A simple formula is provided for calculating the optimal portfolio for a set of price processes satisfying some simple conditions. Properties of the optimal investment strategy for assets governed by multiple Ornstein-Uhlenbeck processes are studied. The paper ends with a short discussion of the implications of these ideas for financial markets.

Date: 2009-03
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0903.2910

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