Kelly betting or proportional betting is an application of information theory to investing and gambling. Its discoverer was John Larry Kelly Jr..
Part of Kelly's insight was to have the gambler maximize the expectation of the logarithm of his capital, rather than the expected profit from each bet. This is important, since in the latter case, one would be led to gamble all he had when presented with a favorable bet, and if he lost, would have no capital with which to place subsequent bets. Kelly realized that it was the logarithm of the gambler's capital which is additive in sequential bets, and "to which the law of large numbers applies."
Read more about this topic: Gambling And Information Theory
Famous quotes containing the word betting:
“Courtroom—A place where Jesus Christ and Judas Iscariot would be equals, with the betting odds in favor of Judas.”
—H.L. (Henry Lewis)