Questions tagged [position-sizing]
31 questions
6
votes
1 answer
Position sizing comparison of inverse volatility and inverse variance
Apologies as I suspect this is a basic question I've been too afraid to ask (as an academic without "real" trading experience)--
I've seen a lot of literature where trades are sized proportional to volatility raised to a power (usually -1 or -2).…
Michael Clinton
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4
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If I have a model that gives 10% "probability edge" over random chance, how do I calculate the position size?
Lets say that I have an imaginary model that always gives me a 10% edge over straight 50/50 odds, one day in advance, for an index (i.e. 60% chance of winning / 40% chance of losing).
How would I calculate the ideal position size to maximize long…
Contango
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2
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Shrinkage estimates for position sizing
Problem: correlation between realized returns per trade and ex ante payoff is relatively low. Given that, it's possible that small (large) bets should be larger (smaller) than recommended by Kelly.
I have seen shrinkage estimators for Kelly which…
user42108
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