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Adaptive strategies in Kelly’s horse races model

Abstract : Abstract We formulate an adaptive version of Kelly’s horse model in which the gambler learns from past race results using Bayesian inference. We characterize the cost of this gambling strategy and we analyze the asymptotic scaling of the difference between the growth rate of the gambler and the optimal growth rate, known as the gambler’s regret. We also explain how this adaptive strategy relates to the universal portfolio strategy, and we build improved adaptive strategies in which the gambler exploits the information contained in the bookmaker odds distribution.
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https://hal-cnrs.archives-ouvertes.fr/hal-03866477
Contributor : David Lacoste Connect in order to contact the contributor
Submitted on : Tuesday, November 22, 2022 - 5:46:26 PM
Last modification on : Wednesday, November 23, 2022 - 4:03:37 AM

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Armand Despons, Luca Peliti, David Lacoste. Adaptive strategies in Kelly’s horse races model. Journal of Statistical Mechanics: Theory and Experiment, 2022, 2022 (9), pp.093405. ⟨10.1088/1742-5468/ac8e58⟩. ⟨hal-03866477⟩

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