pm: Edge..

[pm]

This is a slightly random question..

Is this formula for calculating your edge in a bet where your win and loss percentages are known correct?

EDGE = payback% * win% - loss%

(so if you were getting paid 1.5 to 1 on a 50/50 bet, your edge would be 1.5*0.5 - .5 = 25%)

[Don Schlesinger]

[pm]

Say you were getting paid 3 to 1 on a 50/50 bet. Your edge would be 3*0.5 - 0.5 = 100%.

So, according to kelly betting, would you wager 100% of your bankroll on this bet, since your edge is 100%? Or do divide your wager by a variance?

[Don Schlesinger]

> Say you were getting paid 3 to 1 on a 50/50
> bet. Your edge would be 3*0.5 - 0.5 = 100%.

> So, according to kelly betting, would you
> wager 100% of your bankroll on this bet,
> since your edge is 100%? Or do divide your
> wager by a variance?

Neither. You divide by the multiple of the winning payoff (3) divided by the losing wager (1), or 3, in this case. So, the correct Kelly wager is 33.33% of your bank.

Don

[pm]