C Sharp Programming/Kelly Criteria

C# /// <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 }