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Thread: Risk of Ruin

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    Risk of Ruin

    There seems to be a lot of confusion about what Risk of Ruin is. In my opinion it is a great statistic that takes a snapshot of the chance that you will bust out if you always bet the ramp you are using from that point forward. By that definition your RoR changes every time your BR changes unless you change your bet. I would hope that the assumption the stat is based on is false (you will never change your bet ramp before busting out) for everyone unless they feel they can't drawdown due to table minimums and wanting to have a meaningful EV to make a comeback. So resizing is a given.

    Anyway a very intelligent poster said RoR means you are going to keep your bets the same and if you constantly resize RoR is 0. Both of these statements are wrong. In my opinion this shows a lack of understanding that RoR is a statistical tool that measures your chance of busting out assuming you keep the same bet ramp not a defining of how you bet going forward or influenced by how you intend on resizing your bets in a downturn. Your RoR actually changes with every win or loss if you keep the same bet ramp. To talk about an AP playing with a set RoR actually says he intends on resizing his bets to maintain some sort of RoR range around his desired RoR. And to look at what my current RoR is doesn't mean it is that after losing or winning half my BR. Saying you have 0 RoR doesn't refer to constant resizing (that would mean your chance of busting out is 0 and your RoR is whatever it is based solely on your current bet ramp and BR and what game you are playing) but rather to having such a big BR compared to your bet ramp that you will never have to resize. I am just amazed at how often this statistical term gets misused and by what level of expertise it is misused by.
    Last edited by Three; 09-21-2016 at 11:53 AM.

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    T3 is correct that R.O.R. is confusing.

    Long ago I learned (perhaps incorrectly)

    that R.O.R. (without resizing) represents

    the percentage chance of going bust before

    doubling a bankroll.

    I guess that I too need clarification of that.

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    ROR=ROD/1-ROD

    ROR = Total risk of ruin

    ROD = Risk of doubling

    IIRC

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    Risk of ruin has NOTHING whatsoever to do with doubling the bank. ZERO.

    Since I virtually wrote the book on the subject and have explained everything in the most minute detail in BJA3, it sickens me to have Tthree preach about what I do and don't know about the subject, but, in any event, I'll try again: ROR is the probability that you will lose your entire bankroll if you enunciate a bet ramp and continue to use that same ramp until you either theoretically win all the money in the world or go broke trying. Naturally, it is stated only once, at the start of your endeavor, and refers to what I have just written. So, if ROR = 13.5%, and 15 players embark on the above endeavor, on average, two will lose their entire bank, while 13 will get rich ... eventually.

    It goes without saying (WHICH IS WHY I DON'T BOTHER TO SAY IT!!!), that as your bankroll fluctuates, your new ROR, going forward from that point, fluctuates as well. Most people don't bother to reassess their RORs after each bet, but rather at significant thresholds, such as when they have lost, say, 50% of their original bank. If you then decide, for example, to cut your original stakes in half, then from that point forward, you reestablish your original ROR. Again, all of this is stated ad nauseam in BJA3, with myriad charts, tables, and formulas, and it shouldn't have to be restated every time someone talks about the subject here. As far as Tthree's thinking that I don't understand this, let me puke right now.

    If, instead of waiting for some particular threshold to resize, you were to do so (you can't in actual casino play) after every bet you make, and you are betting Kelly-optimally to begin with, then theoretically, your ROR is zero.

    This will be my last post on the topic. For further information, please refer to BJA3, pages 111-149 (39 friggin' pages!), for the most comprehensive discussion of the topic on the planet (except in Tthree's mind).

    Don

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    Quote Originally Posted by DSchles View Post
    Risk of ruin has NOTHING whatsoever to do with doubling the bank. ZERO.

    Since I virtually wrote the book on the subject and have explained everything in the most minute detail in BJA3, it sickens me to have Tthree preach about what I do and don't know about the subject, but, in any event, I'll try again: ROR is the probability that you will lose your entire bankroll if you enunciate a bet ramp and continue to use that same ramp until you either theoretically win all the money in the world or go broke trying. Naturally, it is stated only once, at the start of your endeavor, and refers to what I have just written. So, if ROR = 13.5%, and 15 players embark on the above endeavor, on average, two will lose their entire bank, while 13 will get rich ... eventually.

    It goes without saying (WHICH IS WHY I DON'T BOTHER TO SAY IT!!!), that as your bankroll fluctuates, your new ROR, going forward from that point, fluctuates as well. Most people don't bother to reassess their RORs after each bet, but rather at significant thresholds, such as when they have lost, say, 50% of their original bank. If you then decide, for example, to cut your original stakes in half, then from that point forward, you reestablish your original ROR. Again, all of this is stated ad nauseam in BJA3, with myriad charts, tables, and formulas, and it shouldn't have to be restated every time someone talks about the subject here. As far as Tthree's thinking that I don't understand this, let me puke right now.

    If, instead of waiting for some particular threshold to resize, you were to do so (you can't in actual casino play) after every bet you make, and you are betting Kelly-optimally to begin with, then theoretically, your ROR is zero.

    This will be my last post on the topic. For further information, please refer to BJA3, pages 111-149 (39 friggin' pages!), for the most comprehensive discussion of the topic on the planet (except in Tthree's mind).

    Don
    Lets clear up some confusion on ROR. Suppose that I play for a month and I doubled my bankroll. If then I decided to keep my bet spread the same then I decease my ROR, correct?

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    "Lets clear up some confusion on ROR. Suppose that I play for a month and I doubled my bankroll. If then I decided to keep my bet spread the same then I decease my ROR, correct?"

    From that point forward, sure. You'd now be playing at Half Kelly, and ROR would be 1.82%, if you never resized, going forward.

    Don

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    Yes Mo. One of the trickiest feats was defining how to calculate RoR in BJ. The pay offs not always being one to one and the altering of bets made quantifying RoR problematic but they eventually came up with a few ways of doing it. What I am talking about is exactly what risk of ruin is, what does it mean and how should an AP use it. I contend that:

    1) RoR is a statistic and it quantifies risk of busting out based on the assumption that you will never change your bet ramp to give a RoR for your current BR, bet ramp and game you are playing.

    2) As long as you don't change your bet ramp your RoR changes with any change in your BR or the game you are playing. So RoR is a dynamic statistic that is only valid as a snapshot at any given time.

    3) Since it is a statistic the RoR snapshot is only literally true if the assumption that you will never change your bet ramp becomes true in retrospect after you die or you bust out and it was only true for the given time the RoR snapshot was taken. And that RoR was only accurate for the point in time it was assessed. RoR is a statistic that changes with BR and bet ramp and game you play.

    4) It is only useful to the AP if you understand these concepts. If you never change your bet ramp it is of little or no use to you. The use of RoR for the AP is to use RoR snapshots to maintain a reasonable risk as BR fluctuates. The closer to full kelly you play the more often you will be adjusting your bet ramp. AP's set their RoR and they adjust their bet ramps when it gets too far from what they set RoR at. The only reason an AP would be unlikely to ever adjust their bet ramp because of changing RoR is because the AP plays to a 0 RoR. A RoR of 0 is only possible if you have a huge BR compared to your bet ramp.

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    Quote Originally Posted by DSchles View Post
    ROR is the probability that you will lose your entire bankroll if you enunciate a bet ramp and continue to use that same ramp until you either theoretically win all the money in the world or go broke trying.
    Quote Originally Posted by DSchles View Post
    If, instead of waiting for some particular threshold to resize, you were to do so (you can't in actual casino play) after every bet you make, and you are betting Kelly-optimally to begin with, then theoretically, your ROR is zero.
    This initial definition that RoR assumes you will never change your bet for calculation purposes contradicts the statement that RoR is 0 if you adjust your bets. RoR is only defined by the ASSUMPTION that you will never adjust your bets because RoR is defined by the assumption that you will never adjust your bets. So using the term RoR is defined by the assumption that your bet ramp doesn't change. That is what makes it a snapshot in time. Never does it actually define the likelihood an AP will bust out unless the assumption actually occurs. That is why RoR keeps changing with BR fluctuation. Because RoR means nothing moving forward. It is a snapshot in time that comes up with a useful statistic for that moment. It is not that complicated. RoR changes a your BR changes so it is not dependent on actual events in the future. It depends on assumptions about a future that exists only briefly. When you talk about RoR you are not saying you will always use the same ramp. You are stating a statistical snapshot about what you are doing in the present.

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    The definitions are what the definitions are.
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

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    Quote Originally Posted by DSchles View Post
    From that point forward, sure. You'd now be playing at Half Kelly, and ROR would be 1.82%, if you never resized, going forward.
    Don, I really appreciate that you did the research to create this very useful stat. It may be the most useful stat created although I am not sure you came up with the formulas. According to your book you give the credit to others but you brought it to us.

    That said I believe you are using misleading language here. "From that point forward" is not true at all. I am not saying you don't understand. I am just saying that you use an unfortunate choice of words and have been doing so which is why this thread was started. What you should say is at that point in time you are playing with that RoR. As soon as your BR changes or you resize your bet ramp you are no longer playing with that RoR. That RoR was right for that point in time only according to the assumption that is most likely wrong that you will never resize your bets. Whether the assumption is wrong or not doesn't matter. The illustration of people never changing their bets just explains what the statistic is defining. It has nothing to do with the actual future and that RoR assessment doesn't last for long.

    The explanation of what the stat means has people playing forever without adjusting their bet ramp to their BR but that has nothing to do with the application of the statistic to real life. It is important for people to understand that RoR is not something that travels forward with you as your BR fluctuates. That is why when you say things like "From that point forward" that is you RoR, or "if you constantly resize your RoR is 0" I have a problem with it. It is inconsistent with what RoR is. RoR is a momentary risk assessment for your ramp and BR combination for the game you play. It assumes you never change your bet ramp to generate a statistic based on that assumption so resizing has nothing to do with RoR since by definition RoR assumes you never resize and that particular ROR is only true for that point in time. Both of these points are consistent with the assumption that RoR is based on. Many of your comments are not. Again not because you don't understand but because you are making poor choices in the words you use in answering people. Those poor choices confuse people.

    That is why I started this thread. Your answers need to be consistent with the definition and assumptions RoR is based on otherwise you confuse people. So if one was to say they play with a 5% RoR that would mean they resize their bets to maintain a 5% RoR. If they didn't they should say I set my RoR to 5% at one time but my RoR has fluctuated a lot since then since my BR keeps changing. That is exactly what started this. You said I was wrong to say playing with a 13.5% RoR didn't mean resizing even though I actually stated in the following sentences to resize. In fact resizing is implied when you say you play with any RoR except maybe a RoR of 0. With a RoR of 0 you are unlikely to ever have to resize to continue to play with a RoR of 0.

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    Good grief.
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

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    Quote Originally Posted by Norm View Post
    The definitions are what the definitions are.
    I don't know who you are agreeing with but that is exactly my point. You can't make statements that defy the definition. And the definition makes a RoR assessment that is only true for that point in time. That RoR assessment doesn't mean anything once you BR, bet ramp or game you are playing has changed. Comments made about RoR should be consistent with those statements.

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    Quote Originally Posted by Tthree View Post
    I don't know who you are agreeing with...
    Really?
    I think its pretty obvious.

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