Kuhn-Tucker conditions, Gambling and Investing

This week, we are again delighted to host professor Tijms, who is becoming a regular author at SECTOR. This week, professor Tijms introduces us to the infamous Kelly strategy originally used in betting, which has found its home in many modern day optimization problems in finance. He expertly guides the reader through the theoretical background of the Kelly strategy, and shows how these can be applied in different settings. It is a wonderful example of how the techniques used in Operations Research can be used to construct a profit making strategy in complex financial markets, and what the intuition behind this seemingly complex piece of mathematics is.

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