Topic：A Probabilistic View on Investment Position Sizing Problem

Date&Time：2015/12/25(五) 14:20

Speaker：鍾偉和 博士 (中央研究院)

Location：清華大學台達館 R216

Abstract :
With the rapid developments of economic activities, various financial and investment instruments have attracted tremendous attentions from the general public. Financial instruments play vital roles in the commercial interactions among economic entities. Financial instruments, such as currency, stock, and their derivatives, facilitate the economic activities via functions of borrowing, lending, dispatching economic resources and risk transferring among economic entities. Without proper techniques for risk evaluation and position sizing, investors are often burdened by unnecessary risks, and suffer from the resulting investment losses. In this talk, we will investigate the investment risks and position sizing techniques via the probabilistic perspective.

We will first introduce a simple probabilistic model for a generic investment opportunity, and then discuss the Kelly Criterion. The Kelly criterion provides the optimal rule for investment position sizing in the sense of maximum rate of asset growth. We will also discuss the position sizing and the resulting statistics of profits and losses, in the scenario of consecutive multiple games of investments. Another section covering common financial instruments available to the public will also be covered. This talk aims to provide basic financial knowledge to engineers and scientists, which can potentially complement the scientific knowledge set.