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3.13. Bachelier's martingale. Consider a game that, at each coup, pays a to with probability p,...
Question 3 (15 pts). A gambler plays a game in which a fair 6-sided die will be rolled. He is allowed to bet on two sets of outcomes: A (1,2,3) and B (2,4,5,6). If he bets on A then he wins $1 if one of the numbers in A is rolled and otherwise he loses $1 -let X be the amount won by betting on A (so P(X-1)-P(X1)If he bets on B then he wins $0.50 if a number in...
B2. Describe the basic ideas behind the gambler's ruin model. For an unfair game where the gambler has probability p of winning and q (1-p) of losing, show that the probability that the gambler attains a fortune of N starting from an initial sum of j is given by 1-(a/p) obtain a similar expression for φ, the probability that, starting from €, the gambler is ruined before reaching EN and show that dj+ ,-1 for all j 0,1, ,N. Explain...
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56. Suppose that on each play of the game a gambler either wins 1 with probability p or loses 1 with probability 1 - p. The gambler continues betting until she or he is either up n or down m. What is the probability that the gambler quits a winner
56. Suppose that on each play of the game a gambler either wins 1 with probability p or loses 1...
1. Consider the following "Gambler's Ruin" problem. A gambler starts with a certain number of dollar bills between 1 and 5. During each turn of the game, there is a .55 chance that the gambler wil win a dollar, and a .45 chance that the gamble will lose a dollar. The game ends when the gambler has either S0 or S6. Let Xn represent the amount of money that the gambler has after turn n. (a) Give the one-step transition...
Consider a play of the casino game `Quick Draw'. In this game, a player pays $11 to play. The player picks one card from a standard pack of 52 cards (i.e. there are four A’s and four K’s in a standard pack of 52 cards). If the player gets an Ace, they win $50 but loose the amount they paid to play (the profit is revenue minus cost); if the player selects a King, they win $30 but loose the...
4. [6 marks] Consider a play of the casino game 'Quick Draw'. In this game, the player pays $10 to play. He/she picks onē card from the standard deck of 52 cards (i.e. four A's, four K's, etc.). If the player selects an "A", he/she wins $50 (i.e. the profit is $40); if the player selects a "K", he/she wins $30 (i.e. the profit is $20). Otherwise, the player wins nothing and also loses the bet of $10. Let the...
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Home Chapter 3 Use the following information to answer the next three exercises. The casino game, roulette, allows the gambler to bet on the probability of a ball, which spins in the roulette wheel, landing on a particular color, number, or range of numbers. The table used to place bets contains of 38 numbers, and each number is assigned to a color and a range. Ist Dozen 2nd Dozen 3rd Dozen 1 to 18 EVEN ODD 19 to 36...
John is playing a slot machine game on his smart phone, and pays $1.00 for each spin. He can play one spin after another until he either quits or wins a game. If he quits, he loses all of the money he paid for the spins. However, he will get all of his money back if he wins a spin. Let Ai be the event that he wins at ith spin, and P(Ai) = 1/5^i Moreover, the events A_i’ s...
(6 marks) Consider a filtered probability space (2,F,P, Ftte.). a. (2 marks) Let the stochastic process (Xo.7] have independent increments and sat- b. (2 marks) Let eo.] be a stochastic process with Ep[X] Xo for all t E [0,T]. Is c. (2 marks) Let (W be a Brownian motion. Given c 0, and define the stochastic isfies Ep[IXll < oo fort [0,T]. Is the stochastic process {Ztieo.r], where z, = xt-EP[Xt] is a martingale with respect to {Ft}120 ? Explain....
In the carnival game Under-or-Over-Seven, a pair of fair dice is rolled once, and the resulting sum determines whether the player wins or loses his or her bet. For example, using method one, the player can bet $2.00 that the sum will be under 7, that is, 2, 3, 4, 5, or 6. For this bet, the player wins $2.00 if the result is under 7 and loses $2.00 if the outcome equals or is greater than 7. Similarly, using...