What's the mathematics foundation of Money Management?
Posted: Tue Dec 20, 2005 10:44 am
Which division of mathematics does Money Management belong to? Gambling Theory, Stochastic Integration, or any others?
Thanks.
Thanks.
If you read Fortune's Formula by William Poundstone, you would say it is in the realm of 'Information Theory' (which is a great book by the way - on my recommended trading top list), but I believe for practical purposes it is more related to probability theory than anything else, since you are trying to determine the amount to risk that gives you the 'best' risk/reward ratio for your objectives in the context of a estimated distribution of possible trade outcomes.
Hope this helps
Paul