In this paper, we study the Kelly criterion in the continuous time framework building on the work of E.O. Thorp and others. The existence of an optimal strategy is proven in a general setting and the corresponding optimal wealth process is found. A simple formula is provided for calculating the optimal portfolio for a set of price processes satisfying some simple conditions. Properties of the optimal investment strategy for assets governed by multiple Ornstein-Uhlenbeck processes are studied. The paper ends with a short discussion of the implications of these ideas for financial markets. © 2009 ICST Institute for Computer Sciences, Social Informatics and Telecommunications Engineering.
CITATION STYLE
Lv, Y., & Meister, B. K. (2009). Application of the Kelly criterion to Ornstein-Uhlenbeck processes. In Lecture Notes of the Institute for Computer Sciences, Social-Informatics and Telecommunications Engineering (Vol. 4 LNICST, pp. 1051–1062). https://doi.org/10.1007/978-3-642-02466-5_105
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