I'm trying to do a kelly criterion optimization of a group of simultaneous binary bets. Each bet has two values associated with it, the probability of success, P, and the payout if successful, r. If the bet loses, the entire premium is lost.
So if I put in a set of 20 bets that need to be bet on simultaneously, what is the ideal weighting, X, to give to each to maximize the growth of capital from placing those bets. This is obviously more difficult than the trivial calculation of figuring out the highest expected value(all capital invested in the bet with the most profitable bet). A paper, "Algorithms for optimal allocation of bets on many simultaneous events", gives a more detailed description of the problem here: http://www.filedropper.com/whitrow2007kellypaper For me, the limitations on the calculation are that all values for X must be positive (long only) and the sum of all the X must be less than or equal to 1 (no leverage). Are there any packages or methods that would be useful for solving this kind of problem? _______________________________________________ [email protected] mailing list https://stat.ethz.ch/mailman/listinfo/r-sig-finance -- Subscriber-posting only. If you want to post, subscribe first. -- Also note that this is not the r-help list where general R questions should go.
