When people calculate Risk of Ruin are they assuming a reinvestment of winnings in the bank roll, or are they assuming the bank roll remains constant? For example I understand that if my BR is $20000 and my max bet is $200 I have an RoR of around 1%, is that with or without reinvestment of winnings?
ROR calculations
- Thread starter Sput
- Start date
Automatic Monkey
Banned
Usually it's not adjusted
Your RoR depends on a few things other than your max bet so I can't tell if that's correct. 100 times your max bet for the kinds of spread used in shoe games is close to a full-Kelly bankroll, and the risk of ruin for full-Kelly with no readjust is much higher, around 13%. To get it under 2% you need to go to half-Kelly, which is twice the bankroll requirement.
There is a quick and easy way to convert a full-Kelly to a helf-Kelly bankroll. Simply take your bankroll and bet it on a hand of craps. About 49% of the time you walk away properly capitalized for a blackjack career.
Your RoR depends on a few things other than your max bet so I can't tell if that's correct. 100 times your max bet for the kinds of spread used in shoe games is close to a full-Kelly bankroll, and the risk of ruin for full-Kelly with no readjust is much higher, around 13%. To get it under 2% you need to go to half-Kelly, which is twice the bankroll requirement.
There is a quick and easy way to convert a full-Kelly to a helf-Kelly bankroll. Simply take your bankroll and bet it on a hand of craps. About 49% of the time you walk away properly capitalized for a blackjack career.
Automatic Monkey
Banned
Reinvesting
If you always spend all of your winnings, you will definitely eventually reach ruin. Sooner or later you will lose enough hands in a row to exhaust your bankroll. When you reinvest, your bankroll builds up to a point where ruin becomes less and less likely simply because of the amount of money you have. It accelerates at a rate faster than the probability of losing enough hands in a row, something like a rocket reaching escape velocity from earth. But ruin is still always there- even if you have a billion dollars playing a $5 game, it is possible to lose it all, just not likely in a million lifetimes.
One thing about ruin theory though is that it's absolute and the only parameters are the advantage of your game, the variance, and the amount of money you have at that time that you're calculating it. Let's say you have a half-Kelly bankroll and that gives you a RoR of 1.8%. Now let's say you lose half of it; your RoR at this point is around 13%, because you've already been halfway screwed and you're on the bad end of the bell curve, and you must forget all about how you used to have a half-Kelly bankroll. Sad and frustrating but real.
If you always spend all of your winnings, you will definitely eventually reach ruin. Sooner or later you will lose enough hands in a row to exhaust your bankroll. When you reinvest, your bankroll builds up to a point where ruin becomes less and less likely simply because of the amount of money you have. It accelerates at a rate faster than the probability of losing enough hands in a row, something like a rocket reaching escape velocity from earth. But ruin is still always there- even if you have a billion dollars playing a $5 game, it is possible to lose it all, just not likely in a million lifetimes.
One thing about ruin theory though is that it's absolute and the only parameters are the advantage of your game, the variance, and the amount of money you have at that time that you're calculating it. Let's say you have a half-Kelly bankroll and that gives you a RoR of 1.8%. Now let's say you lose half of it; your RoR at this point is around 13%, because you've already been halfway screwed and you're on the bad end of the bell curve, and you must forget all about how you used to have a half-Kelly bankroll. Sad and frustrating but real.