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Gambler going broke at an exact round

Question

A player begins with n≥1n\ge1 dollars (an integer). Every round they gain one dollar with probability pp or lose one dollar with probability 1−p1-p, and they stop as soon as their wealth reaches zero. Let f(p,n,k)f(p,n,k) be the probability that ruin happens at precisely round n+2kn+2k, for an integer k≥0k\ge0. Evaluate f(1/3,5,3)f(1/3,5,3), rounded to four decimal places.

Short answer

About 0.1084. Ruin at round n+2kn+2k needs kk wins and n+kn+k losses, with probability (n+2kn+k)qn+kpk\binom{n+2k}{n+k}q^{n+k}p^{k} for the counts (q=1−pq=1-p); by the ballot theorem (read backwards from ruin) a fraction nn+2k\tfrac{n}{n+2k} of those paths first hit zero at the last step. With p=13,n=5,k=3p=\tfrac13,n=5,k=3: (113)(13)3(23)8⋅511≈0.1084\binom{11}{3}\left(\tfrac13\right)^3\left(\tfrac23\right)^8\cdot\tfrac5{11}\approx0.1084.

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

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