Markets: A Rigorous Course
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M03 · Problem 6 ★★ Check

Choosing a Kelly fraction from a drawdown limit

Under the GBM model of Proposition 3.8, find the largest Kelly multiple cc for which the probability of ever losing 30% of starting capital is at most 5%. What share of the maximum growth rate does this cc keep?

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Commas, ₹, % and 1e-3 notation are accepted.

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