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If you imagine a scale from -100 to 100, if the market has moved up from 0 to 40, what is the probability is will continue to 100?

There is a 50-50 chance to move up or down from 0, but what is the probability of moving to 100 when it has already moved to 40?

This may be a simple question, but I am struggling! Can someone share the the algorithm that solves this problem?


Is the answer 70%, ie. if at 0 it is 50-50 to go up or down, if it moves to 40 there is 70% chance it will rise to 100 and a 30% chance it will not?

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    It depends on which model you choose for the stockmarket. For example the simplest model would be the binomial model ( http://en.wikipedia.org/wiki/Binomial_options_pricing_model )2011-06-15
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    Wow... that is complicated! Thank you though. Is there some simplier answer? Maybe the mention of the stockmarket made it more complex than it need to be.2011-06-15
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    Do a search on "stochastic calculus" to see how truly bad things can get when transitioning from discrete models, such as the binomial model, to continous models.2011-06-15
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    Thank you. What if this was a straight case of up or down movement, not stock market movement.... this is complicating things... lets just imagine a straight up or down.2011-06-15

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