In probability theory and intertemporal portfolio choice, the Kelly criterion (or Kelly strategy, Kelly bet, …), also known as the scientific gambling method, is a formula for bet sizing that leads almost surely to higher wealth compared to any other strategy in the long run (i.e. approaching the limit as the number of bets goes to infinity).
The Kelly bet size is found by maximizing the expected value of the logarithm of wealth, which is equivalent to maximizing the expected geometric growth rate.
The Kelly Criterion is to bet a predetermined fraction of assets, and it can seem counterintuitive.
