Probability Brownian motion is up at 1 and down at 2
Question
Let be a standard Brownian motion. Compute .
Short answer
. Write and with independent standard normals. The event is a wedge of the plane, and by rotational symmetry its probability is .
Adapted from Zhou, A Practical Guide to Quantitative Finance Interviews, sec. 5.4 Brownian Motion and Stochastic Calculus, 'Brownian motion C', p.129; question and answer rewritten by SelfMadeQuant.com.
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