Risk & Sizing

How much to bet — Kelly, drawdown, Value at Risk, and fractional sizing under uncertainty.

Kelly Criterion

The Kelly criterion sets the bet size that maximizes long-run growth of capital, given your edge and odds. It is the mathematically optimal sizing rule — and brutal if your edge is overestimated.

Value at Risk (VaR)

VaR estimates the maximum loss a position or portfolio is unlikely to exceed over a horizon at a given confidence — e.g. '95% 1-day VaR of $4k.' Useful as a limit, dangerous as a guarantee.