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Kelly Criterion The Bet Sizing Formula Behind Blackjack and Wall Street
WikipediaThe Kelly criterion is a bet sizing formula that sets what fraction of a bankroll to stake, and getting that fraction wrong destroys an otherwise sound edge. John Larry Kelly Jr. published it at Bell Labs in 1956 in A New Interpretation of Information Rate, deriving it from Claude Shannon's work on noisy communication channels rather than from any theory of finance.
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