Two people A and B play a series of games, in which they bet on aparticular share price increasing or decreasing on a particular day. Ifthe share price increases, player B pays player A £1; whereas if theshare price decreases, player A pays player B £1. The probabilityof the share price increasing on any particular day is p independentlyof any other day, and the probability of the share price decreasing isq = (1– p). Initially, both A and B have £2, and the series of gamesends when one player runs out of money. We let X, be amount ofmoney possessed by player A after n days, so Xo = 2, and we considerthe random process Xo, X1, X2, ....(a) Explain why the state space of this random process is {0, 1, 2, 3, 4}.(b) Explain why this random process is a Markov process.(c) Explain why the transition matrix for this random process is1 0 0 0 0q 0 p 0 00 0 q 0 p0 0 0 0 1(d) What is the 2-step transition matrix for this Markov process?(e) Classify the states of this random process.

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MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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