Risk of ruin calculations

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megarain
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So, I have a friend, who is a world class poker player.

Hes just won 2 x $100k events, so his bank is now .. lets say $500k.

He has formed an aquaintance with a betting syndicate, who are placing large multi type bets, at Bet365 prices, on quality leagues, every day.

The syndicate want massive bets, and hes taken to laying them $200k liability, for a 7-9 fold multi.
soccer multi.jpg
The edge on the acca, is small .. maybe 3-4%.

How likely is he to go bust ?

Thx
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MemphisFlash
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Very Likely!!!!
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megarain
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Yeah, thats my thought .. but how do u quantify it.

If he lays them to lose $50k, I couldnt really argue .. thou, its prob on the high side.

I imagine $20k, would be right .. like 10x,less what hes doing.
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MemphisFlash
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you don't need to quantify it, you just know it's a stupid bet!!!!!
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Derek27
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40% is a massive chunk of his capital to risk!
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ShaunWhite
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How come a 'world class' poker player has to ask about risk management? That should be his bread and butter unless his two wins were fortunate.
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megarain
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Hes young, and does understand the game.

He has a +EV spot .. its just the risk management that is wrong.

I would like to be able to show him some maths to work out what his liability should be .. but, yeah, can see it seems wrong.

Young people take chances .. nothing wrong with that.
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megarain
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Fire up Excel and type the following formula

=ROUND(LN(555)/-LN((1-0.50)),0)

Gives the answer: -

= 9

In 550 throws you will get a maximum run of nine heads in a row.



Thx, but I have v basic excel skills, and just copying the link, gives this error.
excel error.jpg
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megarain
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Its an interesting excercise.

He has laid these bets every day, for the last 45 days.

he was a mile in front, but they hit one.

If they play every day, for the soccer season .. say 7 mths .. thats 200 days.

If they are backing 33/1 chances, with a 3% -EV, u would expect them to hit 5-6 times.

so, 5-6 times out of 200 .. how likely is it really, to be 3 hits in 30 ?
pythonic
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megarain wrote:
Thu Oct 04, 2018 7:10 pm
Yeah, thats my thought .. but how do u quantify it.

If he lays them to lose $50k, I couldnt really argue .. thou, its prob on the high side.

I imagine $20k, would be right .. like 10x,less what hes doing.
20k exposure looks ok according to Kelly. That is, IF you assume that his counterpart has no edge against the BF starting price and IF you also assume that his counterpart is playing completely fair. Two big IFs! And that also assumes that he scales down if he has a loosing streak.
Anything more than 50k is way too risky.
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Euler
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megarain wrote:
Thu Oct 04, 2018 8:52 pm
Thx, but I have v basic excel skills, and just copying the link, gives this error.
This should work

=ROUND(LN(555)/-LN(1-0.5),0)
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Kafkaesque
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ShaunWhite wrote:
Thu Oct 04, 2018 8:09 pm
How come a 'world class' poker player has to ask about risk management? That should be his bread and butter unless his two wins were fortunate.
The two aren't mutually exclusive. I know a few very high level poker players falling into two categories.
1) Those with an intuitive understanding of RoR without quantifying it.
2) Those without an understanding and going bust every few years, only to build a bankroll again and again.

I completely agree that risk management is essential to maximise the results of the work and net worth, but not using it - whether at all or not ideally - doesn't as such have anything to do with being world class.
megarain wrote:
Thu Oct 04, 2018 6:25 pm
So, I have a friend, who is a world class poker player.

Hes just won 2 x $100k events, so his bank is now .. lets say $500k.

He has formed an aquaintance with a betting syndicate, who are placing large multi type bets, at Bet365 prices, on quality leagues, every day.

The syndicate want massive bets, and hes taken to laying them $200k liability, for a 7-9 fold multi.

soccer multi.jpg

The edge on the acca, is small .. maybe 3-4%.

How likely is he to go bust ?

Thx
megarain wrote:
Thu Oct 04, 2018 8:13 pm

I would like to be able to show him some maths to work out what his liability should be .. but, yeah, can see it seems wrong.
My initial take is that you're going about it the wrong way around. If he's taken that sort of liability without much thought, he'll go bust through this scheme or poker soon enough no matter what, and will have to build again. It wouldn't matter what you calcs show to him imho, because you're just showing him what he already deep down knows is the case, without listening to it.

If you want to help, the way to do so is if you can get him to consider, how much it means to him to have a bank of 500k right now. How important is that bank (or the income it degenerates) to his current lifestyle? How important is it to him, on a non-monetary level, to be able to play poker at the $-entry levels, he's able to right now? Does he have funds set aside to live without poker income if he has to build again? Does he have enough of a reputation and contacts in the community to get a good staking deal to help that process?

Once he's looked at those things - hopefully honestly - he can try to quantify how much risk, he's willing to take on board, ie. risk of going (bankroll) broke in the next 3, 6, 12, 24 months. At that point he should really be able to find and do the calcs himself with RoR and Kelly without having you ask on a forum, if he's world class at anything ;)
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ShaunWhite
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Fair point Kafka, I accept it.

And very wise words about this being more than a question of mathematics. Bottom line should always be 'sht happens, so how will you feel when it does'

Mega, the other thing that springs to mind is who's placing the bets and why they want him to lay them. If they're shrewd and successful perhaps nobody else will touch them, or are they mugs and your friend has got lucky.

"Successful syndicate cosies up to a young guy who's just won 6 figures" does sound like a recipe for disaster.
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megarain
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Many thx for the very thoughtful replies.

There are definately more levels to this .. and I may just have to see him in person, to get to the bottom of it.

Unfortunately, he doesn't live round the corner.

Hes not a degenerate. He has had more accounts closed than u would think possible - targeting his sports betting expertise - which makes
the whole thing, even more puzzling.

On another channel, I was referred to this link, for calculating kelly for independent simultaneous events. I need to get my head
around the right numbers to put in the boxes.

https://www.sportsbookreview.com/picks/ ... alculator/
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