C Sharp Programming/Kelly Criteria

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C#[edit]

       /// <summary>
        /// Determines the optimal bet size (in a series of bets) to minimise risk & maximise returns...
        /// Assumptions:
        /// Given a profitable situation to begin with...(and the probability estimate is accurate)
        /// No associated transaction costs or taxes
        /// If you lose - then you lose all of the bet (and not just a portion)
        /// See. http://en.wikipedia.org/wiki/Kelly_criterion
        /// </summary>
        /// <param name="P">Probability of winning the bet. A number between [0,1]</param>
        /// <param name="b">Potential earnings/profit/payout or the odds expressed as a decimal</param>
        /// <param name="availableBankroll">The amount of capital available for gambling. Default value is 50</param>
        /// <returns></returns>        
        public static string GetKellyCriteria(double P, double b, double availableBankroll = 50)
        {

            #region Sanitation

            if( (P<0.0) || (P>1.0) )    
                throw new Exception ("Probability should be between [0,1]");
            if (availableBankroll == 0)
                throw new Exception("Available bankroll is required");
            if (b == 0)
                throw new Exception("Potential payout is required");

            #endregion

            #region Kelly Criteria Calc

            double q = 1 - P;
            double kellyValue = ((P * b) - q) / b;
            double optimalBet = Math.Round(((kellyValue * availableBankroll)), 2);

            #endregion

            #region Interpretation

            if (kellyValue > 0)
            {
                return string.Format("Kelly Criteria: +{0}%. Optimal bet = +{1} out of {2}. Consider betting...", Math.Round(kellyValue*100.0, 2), optimalBet, availableBankroll);
            }
            else if (kellyValue == 0)
            {
                return string.Format("Kelly Critria: {0}%. Optimal bet = {1}. No edge. Do nothing.", Math.Round(kellyValue*100.0, 2), optimalBet);
            }
            else
            {
                return string.Format("Kelly Criteria: {0}%. Optimal bet = -{1}. Consider laying if available.", Math.Round(kellyValue*100.0,2), optimalBet);
            }

            #endregion

        }