Symmetric walk from 80 absorbed at 0 or 1000
Question
A simple symmetric random walk on the integers starts at and moves up or down by with equal probability at each step. It stops when it first hits either or . What is the probability that it stops at ?
Short answer
. The position is a martingale, so by optional stopping , giving and .
Adapted from Joshi, Denson & Downes, Quant Job Interview Questions and Answers, Q3.40, p.84; question and answer rewritten by SelfMadeQuant.com.
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Open the worked solutionLessons behind this question
- Gambler's Ruin and First Passage Times
- Simple Random Walks — Symmetric and Asymmetric
- The Optional Stopping Theorem
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