Risk-Constrained Kelly Gambling
Enzo Busseti, Ernest K. Ryu, Stephen Boyd · The Journal of Investing
Main finding
In simulations, risk-constrained Kelly bets achieved better trade-offs than fractional Kelly: more growth at the same drawdown risk, or less drawdown risk at the same growth.
Limitations
Assumes the return distribution is known; the drawdown bound is conservative; no sports-betting test.
Study details
- Authors
- Enzo Busseti, Ernest K. Ryu, Stephen Boyd
- Published
- 2016
- Venue
- The Journal of Investing 25(3), 118–134
- Status
- Published
- Evidence type
- Peer-reviewed theory
- Evidence strength
- Moderate (our assessment of how much weight the finding can bear)
- Sport
- None specific
- Markets
- Generic bets with a known distribution of returns
- Method
- Adds a constraint on the probability of a large drawdown to the Kelly growth problem, derives a convex bound and solves it as an optimisation problem; tested by simulation.
- Sample
- Not applicable (simulation).
- Replication
- Unknown; code accompanies the paper.
Read the original
doi:10.3905/joi.2016.25.3.118 (opens in a new tab) · Free version (opens in a new tab)
Our summary is an original paraphrase for education. Verification: Bibliographic record checked against publisher, index or author listings. Checked 2026-10-25.