Kelly Criterion Calculator

## Project description

Kelly Criterion
===============
Money management strategy based on Kelly J. L.'s formula described in "A New Interpretation of Information Rate" [1].
The formula was adopted to gambling and stock market by Ed Thorp, et al., see:
"The Kelly Criterion in Blackjack Sports Betting, and the Stock Market" [2].

This program calculates the optimal capital allocation for the provided portfolio of securities with the formula:

`f_i = m_i / s_i^2`

where
* `f_i` is the calculated leverage of the i-th security from the portfolio
* `m_i` is the mean of the return of the i-th security from the portfolio
* `s_i` is the standard deviation of the return of the i-th security from the portfolio

assuming that the strategies for the securuties are all statistically independent.

Reference (Matlab) implementation was taken from Ernie Chan's Quantitative Trading book [3].

Installation
------------
`pip install kelly_criterion`

Usage
-----
`kelly_criterion [--risk-free-rate=<pct>] <start-date> <end-date> <security>...`

Example
-------
```
\$ kelly_criterion --risk-free-rate 0.04 2001-02-26 2014-12-28 IBB VDE SPY
Kelly Criterion calculation
Arguments: risk-free-rate=0.04 start-date=2001-02-26 end-date=2014-12-28 securities=['IBB', 'VDE', 'SPY']

Leverages per security:
IBB: 3.61
SPY: -2.73
VDE: 1.04
Sum leverage: 1.92
```

Dependencies
------------
* Python 2.7
* [Numpy](http://www.numpy.org/)
* [Pandas](http://pandas.pydata.org/)
* [Docopt](http://docopt.org/)

References
----------
* [1]: [A New Interpretation of Information Rate](http://ieeexplore.ieee.org/stamp/stamp.jsp?reload=true&tp=&arnumber=6771227)
* [2]: [The Kelly Criterion in Blackjack Sports Betting, and the Stock Market](http://www.edwardothorp.com/sitebuildercontent/sitebuilderfiles/beatthemarket.pdf)

## Project details

Uploaded `source`