Kelly Criterion Portfolio Optimizer

Description

This project implements a Kelly Criterion-based portfolio optimization tool using KDB+/q. It calculates optimal portfolio weights based on expected returns, probabilities, and a risk-free rate.

Features

• Calculates Kelly Criterion for individual assets
• Computes expected portfolio return
• Estimates portfolio risk using standard deviation
• Optimizes portfolio allocation based on Kelly Criterion

Requirements

• KDB+/q environment (version 3.0 or higher recommended)

Usage

1. Save the script as kelly_optimizer.q
2. Run the script in q:

   q kelly_optimizer.q
   

Function Descriptions

• calcKelly: Calculates Kelly Criterion for an asset
• calcExpectedReturn: Computes expected return of the portfolio
• calcPortfolioRisk: Estimates portfolio risk
• optimizePortfolio: Main function that optimizes portfolio allocation

Example Output

Optimized Portfolio Allocation:
-0.2784687 -0.2594896 -0.2405104 -0.2215313
Expected Portfolio Return: 0.083
Portfolio Risk: 0.0315375

License

This project is open source and available under the MIT License.

Contributing

Contributions, issues, and feature requests are welcome. Feel free to check issues page if you want to contribute.

Author

Thomas Johnston

Acknowledgments

• Inspired by the work of John L. Kelly Jr. on optimal betting strategies
• Developed as part of a quantitative finance learning journey