Suppose that (Xn)n20 is a stochastic process, such that X, is the value of an asset at day n. Assume that it is a martingale with respect to itself and Xo reaches value 0, we say that its value crashes. What is the probability that the value £50. If it of the asset doubles before it crashes?

College Algebra (MindTap Course List)
12th Edition
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:R. David Gustafson, Jeff Hughes
Chapter8: Sequences, Series, And Probability
Section8.7: Probability
Problem 41E
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Suppose that (Xm)n>o is a stochastic process, such that Xn is the value of an asset
at day n. Assume that it is a martingale with respect to itself and Xo = £50. If it
reaches value 0, we say that its value crashes. What is the probability that the value
of the asset doubles before it crashes?
Transcribed Image Text:Suppose that (Xm)n>o is a stochastic process, such that Xn is the value of an asset at day n. Assume that it is a martingale with respect to itself and Xo = £50. If it reaches value 0, we say that its value crashes. What is the probability that the value of the asset doubles before it crashes?
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