Kelly trading and market equilibrium

Kelly trading and option pricing

Leverage and risk relativity: how to beat an index

Direction


Our trading strategies all have DNA from the optimal growth theory initially developed by Kelly (1956) and Latané (1959). As shown in Thorp (1971), the so-called Kelly strategies answer the fundamental question of how much leverage an investor should and can accept – a topic sorely missing in the celebrated mean variance model of Markowitz (1952).

While our trading strategies are proprietary knowledge, Hilbert Capital openly shares the fundamental research taking place within the firm.

References

Kelly, John L., 1956, A new interpretation of information rate, Bell System Technical Journal 35. https://doi.org/10.1002/j.1538-7305.1956.tb03809.x

Latané, Henry A., 1959, Criteria for choice among risky assets, Journal of Political Economy 67. https://doi.org/10.1086/258157

Markowitz, Harry, 1952, Portfolio Selection, Journal of Finance 7.
https://doi.org/10.1111/j.1540-6261.1952.tb01525.x

Thorp, Edward O., 2011, The Kelly criterion in blackjack, sports betting and the stock market, in: L.C. MacLean, E.O. Thorp, and W.T. Ziemba, ed.: The Kelly capital growth investment criterion (World Scientific, Singapore). https://doi.org/10.1142/7598