Chapter 3
First Step Analysis for
Stochastic Processes
3.1 A Coin Tossing Experiment
Rating
Everyone: contains no mathematics.
Section Starter Question
Suppose you start with a fortune of $10, and you want to gamble to have
$20 before you go broke. You flip a fair coin successively, and gain $1 if the
coin comes up “Heads” and loses $1 if the coin comes up “Tails”. What do
you estimate is the probability of getting to $20 before going broke? How
long do you estimate it take before one of the two outcomes occurs? How do
estimate each?
Key Concepts
- Performing an experiment to gain intuition and experience with coin-
tossing games.
Vocabulary
- We callvictorythe state of reaching a fortune goal, before going broke.