KELLY, APPLIED

Kelly, Applied

The same half-line formula has, over seventy years, been applied in casinos, racing, bonds, stocks, arbitrage and crypto — each domain has a real person and an algorithm. Understand them and you understand where F-Star's crypto asset allocation service comes from.

Each application = a story + an algorithm (formula and code). The last one is the point: the non-custodial crypto asset allocation service built on F-Star.

Casino Blackjack

Thorp · 1961

Reno, 1961: Thorp used card counting to compute his edge, then the Kelly formula to size the bet — doubling his stake in 72 hours, the first time anyone beat a commercial casino with mathematics.

Hong Kong Racing

Benter · 1984–2001

Blacklisted by US casinos, physicist Bill Benter used a 100+ variable model and Kelly sizing to win a billion dollars at the Hong Kong track over 17 years — on an information edge of just 2-5 percentage points.

Bond Portfolios

Bill Gross · PIMCO

Bill Gross started from a $200 blackjack stake, carried the discipline to the bond desk and grew PIMCO to ~$2T — his '2% rule' is the essence of Kelly.

Value Investing

Buffett & Munger

Buffett never writes the formula, yet takes Kelly-style concentrated bets to the extreme: heavy into American Express in the 1963 crisis, Coca-Cola, Apple. Munger: 'if you see four stocks clearly, put your money in those four.'

Convertible Arbitrage

Thorp / Regan · 1969–1988

Thorp took Kelly to Wall Street: Princeton-Newport ran convertible arbitrage at half-Kelly, and for nineteen years posted seventy-six straight positive quarters — never a losing one.

06FEATURED · OUR SERVICE

Crypto Asset Allocation

F-Star Intelligence · 2026

Seventy years of Kelly discipline, applied to crypto: F-Star Intelligence sources NovaMarket's public track records, sizes by multi-strategy Kelly (quarter-Kelly by default + risk caps), and allocates capital non-custodially into on-chain strategy pools. This is the service we recommend.

AI-Era Betting Discipline

2026 · Chapter 13

In 2026, the Kelly formula is used by AI as 'the last line of defense against the human betting impulse' — the AI computes Kelly and writes a rejection letter; the human decides whether to press confirm.