Risk of Ruin

**MarketMaker** · 07-26-10, 06:25 PM

This paper should help.

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http://www.bjmath.com/bjmath/proport/riskpaper1.pdf

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**Toples** · 08-22-10, 08:53 AM

i got what you need in excell, but on wrong PC

i can get it in 2 days
if you are still interested PM

**Waz** · 08-22-10, 09:09 PM

Toples,

It looks like you are not accepting PMs. Could you PM this to me?

**Sean81** · 08-22-10, 09:40 PM

I didn't think you could calculate this type of thing by plugging different variables into a formula. I thought you would have to run simulations at different variables to determine likelihood. If not, I am also very interested in the formula.

**chipleader** · 08-22-10, 11:15 PM

Originally posted by MarketMaker

This paper should help.

http://www.bjmath.com/bjmath/proport/riskpaper1.pdf

This paper helped me realize how dumb and stupid I am. Thanks buddy.

**Toples** · 08-23-10, 06:13 AM

Originally posted by Waz

Does anyone have the formula (or website) where I can calculate risk of ruin percentage? For example, let's assume something like this:

Bankroll: $10,000
Avg. Bet: $100
Historical win rate: 53%
Plays in a year: 3,000

Given these variables, what are the odds of busting before the end of the year? I would like to get my hands on the exact formula so I can plug in some different scenarios.

i tested your query
you try it yourself with xcell file i will send you and should get same results
here are results assuming
-110 line (1.91) 49,7% risk- expected profit 3690
-105 line (1.95) 37,6% - expected profit 10050
-102 line (1.98) 23,9% -expected profit 14820

**Toples** · 08-23-10, 06:15 AM

seems i cant send PMs either

**Toples** · 08-23-10, 06:30 AM

Error 404 (Not Found)!!1

https://docs.google.com/leaf?id=0B_XyknGRbyXmZGZjZTkxODYtMGI2Yy00MzkzLWIzYzktMjRiNjM4NGRiOGNl&hl=en&authkey=CO6u_toC

try this link to download it

**Toples** · 08-24-10, 06:34 AM

please reply did you manage to download it ???
if not i will upload it to rapidshare or something...

this is great tool for any serious investor....

**statnerds** · 08-24-10, 09:38 AM

your win % moving forward is unknown and undefinable as is your perceived Edge on any event.

additionally, if you switch from a standard betting Unit to one reflective of a percentage of your BR, your Risk of Ruin will be near zero as you will never lose all of your money.

start with 1.5% to 3% of your BR per play, adjust it daily or weekly, and you will have no need for this fancy book learning stuff.

**solobass** · 08-24-10, 09:53 AM

Statnerds, that is the funniest quote ever I love it! Yes I bring data at least. Percentage plays and recalculation is essentially Kelly criterion, or some variation of it. This works great for sports, investments or propositions that occur with great frequency but is less effective for say NFL. It is a great way to keep someone in the game and steadily building though no doubt.

**Bsims** · 08-24-10, 06:22 PM

OK, if you wager a fixed percentage of your bankroll and adjust periodically, here is what will happen. When you have a nice streak, your bankroll will go up and so will your wagers. This will continue until you lose a few. Then as you lose for a while, your bankroll will go down as will your wagers. This won't change until you have some winners.

So when all is said and done and you look back, you will have made bigger wagers on losing bets and smaller ones on winning bets. Effectively, you are doing just the opposite of dollar cost averaging on the stock market. I think this is not good.

**bztips** · 08-24-10, 09:13 PM

Originally posted by Bsims

OK, if you wager a fixed percentage of your bankroll and adjust periodically, here is what will happen. When you have a nice streak, your bankroll will go up and so will your wagers. This will continue until you lose a few. Then as you lose for a while, your bankroll will go down as will your wagers. This won't change until you have some winners.

So when all is said and done and you look back, you will have made bigger wagers on losing bets and smaller ones on winning bets. Effectively, you are doing just the opposite of dollar cost averaging on the stock market. I think this is not good.

A bit off the whole point of this thread, but...
Dollar cost averaging is one of those well-accepted strategies that in fact is a bad idea. If I have a choice to invest $100 a month every month for the next year, or take all $1200 and invest it now, then the choice is very obvious if I really believe the market is going to rise during that period -- put it all in now, when I get today's low price, rather than dribble it in over the coming months when I will be investing at the average of a rising price.

(This isn't really the choice that many stock investors have -- they're putting in a fixed amount of their income each month because they have a budget constraint that doesn't allow them to put the whole amount in at once.)

Just sayin'...

**JayTrotter** · 08-24-10, 11:03 PM

The search for safety is not the path to riches.

U can not win the fight from the dressing room.

**Toples** · 08-25-10, 04:43 AM

Originally posted by Bsims

OK, if you wager a fixed percentage of your bankroll and adjust periodically, here is what will happen. When you have a nice streak, your bankroll will go up and so will your wagers. This will continue until you lose a few. Then as you lose for a while, your bankroll will go down as will your wagers. This won't change until you have some winners.

So when all is said and done and you look back, you will have made bigger wagers on losing bets and smaller ones on winning bets. Effectively, you are doing just the opposite of dollar cost averaging on the stock market. I think this is not good.

kelly is good for you if you have an edge.

Its true you chances of profit decrease, but average profit will be bigger with adjusted stakes after same number of bets if you beat the spread consistently.

**statnerds** · 08-25-10, 07:27 AM

Originally posted by Bsims

OK, if you wager a fixed percentage of your bankroll and adjust periodically, here is what will happen. When you have a nice streak, your bankroll will go up and so will your wagers. This will continue until you lose a few. Then as you lose for a while, your bankroll will go down as will your wagers. This won't change until you have some winners.

So when all is said and done and you look back, you will have made bigger wagers on losing bets and smaller ones on winning bets. Effectively, you are doing just the opposite of dollar cost averaging on the stock market. I think this is not good.

flat betting is a bad choice. nothing is vanilla, you are not going to have predictable winning and losing streaks.

if you take a long term approach and adjust your BR after a set number of plays, you should have no problem. i used the daily or weekly merely as an example of potential options. for some guys, a week would be a few hundred plays, and for others it might be less than 20.

adjusting daily would result in such a minor amount that losing big bets and winning small ones should not be a concern

adjusting after a large, set number of plays, say 500 or more, would negate this concern as well, as while variance will have an affect, high volume and low betting amounts would reduce it's short term effect. long term winning percentages are mandatory.

and everything is moot if you are losing more bets than you are winning.

**wrongturn** · 08-25-10, 08:56 AM

Originally posted by bztips

A bit off the whole point of this thread, but...
Dollar cost averaging is one of those well-accepted strategies that in fact is a bad idea. If I have a choice to invest $100 a month every month for the next year, or take all $1200 and invest it now, then the choice is very obvious if I really believe the market is going to rise during that period -- put it all in now, when I get today's low price, rather than dribble it in over the coming months when I will be investing at the average of a rising price.

(This isn't really the choice that many stock investors have -- they're putting in a fixed amount of their income each month because they have a budget constraint that doesn't allow them to put the whole amount in at once.)

Just sayin'...

A little bit off topic, but I think dollar cost averaging is a great way of investing for most people, the non-pros. If we believe that nobody can time the market consistently and market will alway move up long term (both are true so far), then dollar averaging is actually the best way.

**matekus** · 08-25-10, 10:44 AM

Krigman: Edge, Volatility, and Risk of Ruin in Gambling

Waz,

You should read Alan Krigman's excellent piece, "Edge, Volatility, and Risk of Ruin in Gambling", which includes a downloadable excel file for experimenting with different scenarios.

matekus

**TCMBob** · 01-29-11, 04:19 PM

Originally posted by matekus

Waz,

You should read Alan Krigman's excellent piece, "Edge, Volatility, and Risk of Ruin in Gambling", which includes a downloadable excel file for experimenting with different scenarios.

matekus

thanks for the link, great article.

**dbDan** · 01-29-11, 08:08 PM

You can never lose with Kelly betting as you always only use a fraction of your bankroll.