Gambling with Information Theory

This paper explains a betting strategy also referred to as Kelly’s criterion. It basically explains that when repeating a bet and reinvesting, it is better to bet according to the probability distribution and not let your bet depend on the odds. This paper also explains the value of side information, and its relation with the information theory. This paper will also introduce the notion of stochastic processes and their entropy rate and how these notions are related to betting where a new outcome depends on previous outcomes.