The Optional Stopping/Sampling Theorem

The OST says that given a finite amount of money and a finite time horizon, any betting sequence/strategy cannot improve the expected earnings from a sequence of fair gambles.  More to the point, the theorem is proof that you can’t expect to make money playing a fair game (a martingale) and you can’t bet in such a way that you can expect to beat an unfair game (a supermartingale).  Attached, I’ve written a rundown of the result along with a nice short proof.

The Optional Stopping/Sampling Theorem

Stochastic Process, Optional Stopping Theorem, Expected Value, Conditional ExpectationMartingale


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