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Mass_Driver comments on Open Thread June 2010, Part 2 - Less Wrong
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The traditional answer is to follow the Kelly criterion, is it not? That would imply
where n is the number of tickets. This implies you should buy n such that (€1)*n = Wf*, where W is your initial wealth.
Edit: Thanks, JoshuaZ, for pointing out that the Kelly criterion might not be the applicable one in a given situation.
OK, I have a question! Suppose I hold a risky asset that costs me c at time t, and whose value at time t is predicted to be k * (1 + r), with standard deviation s. How can I calculate the length of time that I will have to hold the asset in order to rationally expect the asset to be worth, say, 2c with probability p?
I am not doing a finance class or anything; I am genuinely curious.
So am I - I'm only aware of the Kelly Criterion thanks to roland thinking I was alluding to it. I haven't worked through that calculation.