About this question
Medium · risk_management · Quant Researcher interview question · risk-management, kelly-criterion, position-sizing, expected-utility, portfolio-theory
The Kelly criterion determines the optimal position size to maximize the expected log-utility of wealth, providing a principled approach to capital allocation. Quantitative traders often apply a fractional Kelly (a scaled-down version) to moderate risk and reduce drawdown volatility from over-betting, especially when strategy parameters are uncertain. Task Implement the function solution(win_prob: float, win_return: float, loss_return: float, kelly_fraction: float = 1.0) to calculate the Kelly