One of the fundamental problems of portfolio theory is how to rationally optimize the portfolio using diversiﬁcation. In practice, maximizing the short term interest is not equivalent to maximizing the long term interest. Kelly’s criterion is considered to be the best strategy of maximizing proﬁt in the long run. In this paper, we discussed the applications of Kelly’s criterion in various scenarios, including binomial cases, univariate stock, uncorrelated and correlated stocks. Diﬀerent approaches were introduced to construct the model of stocks’ behavior. For the ﬁrst time, we discussed the feasibility of extending Kelly’s criterion to option trading.
Applied and Computational Mathematics (MS)
Department, Program, or Center
School of Mathematical Sciences (COS)
Xu, Binyi, "A Strategy of Maximizing Profit in the Long Run Using the Concept of Kelly’s Criterion" (2017). Thesis. Rochester Institute of Technology. Accessed from
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