Toying around with the Kelly criterion I get that the amount I should spend on insurance increases with my income though my intuition says that the higher your income is the less you should insure. Can someone less confused about the Kelly criterion provide some kind of calculation?
For anyone asking, I wondered if, given income and savings rate how much should be invested in bonds, stocks, etc. and how much should be put into insurance, e.g. health, fire, car, etc. from a purely monetary perspective.
The Kelly criterion returns a fraction of your bankroll; it follows that for any (positive-expected-value) bet whatsoever, it will advise you to increase your bet linearly in your income. Could this be the problem, or have you already taken that into account?
That aside, I'm slightly confused about how you can use the Kelly criterion in this case. Insurance must necessarily have negative expected value for the buyer, or the insurer makes no profit. So Kelly should be advising you not to buy any. How are you setting up the problem?
If it's worth saying, but not worth its own post (even in Discussion), then it goes here.