**Books**

Rating | Title | Author | Arena | Cover | Dojo Topic | My Notes & Ideas (Files) | Type | Pages | Recommend | Date | Status | Subtitle | Tagline | Takeaway | URL |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

4 āāāā | Euan Sinclair | Textbook | 198 | September 20, 2020 | Read |

**Media**

Future Value | Name | Full Title | Category | Author | Arena | P.A.R.A. | Theme | Tags | Dojo | URL | Projects | Goal Outcomes | Last Highlighted | Last Synced | Notes | Notes & Ideas | Satus | Created | Updated | Value Goals | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

4 āāāā | Article | Source | Dec 29, 2019 3:12 AM | Dec 30, 2020 6:32 PM | |||||||||||||||||

4 āāāā | Source | Active | Dec 27, 2019 11:56 AM | Jun 24, 2022 12:35 PM | |||||||||||||||||

4 āāāā | Breaking the Market | Bookmark | NP | Investing | Active | Sep 28, 2020 1:18 PM | Sep 28, 2020 1:20 PM | ||||||||||||||

5 āāāāā | Article | breakingthemarket | Source | Investing | portfolio | Read | Oct 12, 2020 11:42 PM | Dec 30, 2020 6:32 PM | |||||||||||||

4 āāāā | Tweets | Robot James | Source | InvestingTrading | Read | Apr 15, 2021 11:39 PM | May 30, 2021 12:17 PM | ||||||||||||||

5 āāāāā | Article | dpg ref from Squeeze | Source | Trading | Read | Apr 7, 2021 12:50 AM | May 30, 2021 12:17 PM |

**Links**

Arithmetic return is over 1 period. Over long run, geometric return is what matters. Higher vol drags down geometric return. Ex: Heads win 50%, tails lose 40%. You would obviously play this one time (actually more) but if you have to play forever you will mathematically go broke.

He is maximizing the geometric return (not leveraged) ā geometric mean frontier and solve for peak

Optimal Kelly = maximum sharpe ratio portoflio (so have to leverage)

### Key Takewaways:

- Geometric return is all that matters in long run
- If two assets have same geo return, mix them 50/50, correlations and variance do not matter
- Negative correlation helps, positive hurts. Can include -ve return assets if they hvae -ve correlation.
- Variance is additive, standard deviations are not (for calcing SD of a portfolio)

### Geometric Return Formulas:

GR = Geometric Return, AR = Arithmetic Return

$GR = AR -(\frac{1} {2} * \sigma ^2)$

$GR = AR - \lparen\frac{1}{2} * Variance)$

**Kelly Criterion, Generalized**

W = win probability

B = loss %

A = gain %

$\LARGE Kelly \% = \frac{W}{B} - \frac{(1-W)}{A}$

**Kelly Growth Factor Formula: **

$\LARGE GR(f) = (f-\frac{f^2}{2})) * \frac{u^2}{\sigma^2})$

Flip a coin. Heads you win 50%, tails you lose 40%. How much do you bet?

Name | Win % | Win Amount | Loss Amount | Bet Size | Gain Factor |
---|---|---|---|---|---|

Game 1 | 19.24% | 500% | 100% | 0.229 | 4.831448744052506e+39 |

Tail Puts | 70% | 50% | 100% | 2.08 | 3.0426425535513843e+141 |

MU call Spreads | 90% | 100% | 100% | 1.79 | 9.430298923255593e+202 |

**Simple Examples**

Coin has 60% chance of heads, 40% tails. You win 1 when heads, lose 1 when tails. In this case, bet 60-40 or 20% of bankroll each time.

If you got 2:1 odds (make $2 when heads, lose $1 when tails) then bet 40%. You take 40% and divide it by 2 (20%). Subtract 60% cahnce of winning from 20% chance of losing (with odds) and bet 40%.

If odds were reversed (lose 2 tails, make 1 heads). Take the 40% chance of losing, divide by .5 (80%). 60-80 = NEGATIVE 20 so you dont bet

**Kelly Links**

Use this one for gain factor