Probability

Martingale

A process whose expected next value, given everything so far, equals its current value.

E[X(n+1) | history] = X(n). A fair game: no drift in either direction.

Optional stopping is the powerful consequence: under suitable conditions the expected value at a stopping time equals the starting value. That solves gambler's ruin in one line - if wealth is a martingale and you start at k with barriers at 0 and N, then k = P times N, so P = k/N.

The trap. Optional stopping needs conditions - a bounded stopping time or bounded increments. The martingale doubling strategy appears to produce guaranteed profit precisely because it violates them, requiring unbounded capital.

Full guide

Martingales and the Optional Stopping Theorem

Why no betting system beats a fair game, why the 'double until you win' strategy is doomed, and what martingales reveal about random walks.

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