[pzhon]

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From someone who doesn't know much about the subject it seems as though c values should be less than 1.

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The pure Kelly Criterion corresponds to c=1, and the probability that you will ever be reduced to p*initial bankroll by following the Kelly Criterion is p. This is already considered too aggressive by most advantage gamblers. If you use a lower value of c, you will experience much worse swings.

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The KC assumes you cannot replenish your roll.

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The definition of bankroll assumes you cannot replenish your bankroll. It was not a special assumption made by Kelly.

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If you can reload you should be more aggressive by lowering your c value.


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If your bankroll is larger than your balance, you may wish to accept gambles that would appear extremely reckless to someone whose bankroll equals your balance. If your bankroll is not your balance, you may not be able to determine a reasonable strategy based on your balance alone, and there may be no fixed value of c that makes sense for your balance.

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Is it just uncertainty in expected value and variance that force investors to use such large c values?

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Even if there were no uncertainty about the expected value and variance of the gambling opportunities, the value of c should still depend upon personal risk tolerance.

Some of the properties of the Kelly Criterion use the assumption that you can rescale your wagers. This is not the case in poker. In general, you expect that higher stakes games will be tougher. There are also limits on how low the stakes can get. These factors both argue for using a greater value of c than the value corresponding to your utility function.