Questions / Quant research, Probability & inference
Stop a fair walk at finite barriers
A simple symmetric random walk starts at 2 and stops on first reaching 0 or 5. What is the probability it reaches 5 first?
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Answer: 0.4 probability (2/5)
- The stopped position is 0 or 5, and its expectation equals the initial position 2 under these finite absorbing barriers. Hence 5P(hit 5)=2 and the probability is 0.4.
Interview shortcut. Fair walk: P(top) = start/top = 2/5.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.