A Quantum Double-or-Nothing Game: An Application of the Kelly Criterion to Spins.

Entropy (Basel)

Centre for Complexity Science, Physics Department, Imperial College London, London SW7 2AZ, UK.

Published: January 2024


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Article Abstract

A quantum game is constructed from a sequence of independent and identically polarised spin-1/2 particles. Information about their possible polarisation is provided to a bettor, who can wager in successive double-or-nothing games on measurement outcomes. The choice at each stage is how much to bet and in which direction to measure the individual particles. The portfolio's growth rate rises as the measurements are progressively adjusted in response to the accumulated information. Wealth is amassed through astute betting. The optimal classical strategy is called the Kelly criterion and plays a fundamental role in portfolio theory and consequently quantitative finance. The optimal quantum strategy is determined numerically and shown to differ from the classical strategy. This paper contributes to the development of quantum finance, as aspects of portfolio optimisation are extended to the quantum realm. Intriguing trade-offs between information gain and portfolio growth are described.

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Source
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC10813872PMC
http://dx.doi.org/10.3390/e26010066DOI Listing

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