TL;DR
Martingale Optional Stopping Theorem: A canonical quantitative trading interview question at olympiad difficulty. Commonly asked at Jane Street, Two Sigma, DE Shaw, Citadel, HRT.
By Valenke Exam Prep Team·Last updated 2026-06-01
olympiadStochastic Processes & Calculus
Martingale Optional Stopping Theorem
Asked at: Jane Street, Two Sigma, DE Shaw, Citadel, HRT
Problem
A gambler starts with and repeatedly bets on a fair coin (heads: +1, tails: -1). The gambler stops when their fortune reaches (ruin) or (target).
(a) Using the optional stopping theorem, find the probability of reaching before .
(b) Find the expected number of bets until the game ends.
(c) A new gambler plays the same game but the coin has . Set up the martingale to find the ruin probability.
Related concepts
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