Option Termination Probability

Problem

Compute the probability that an option with per-step termination probability beta has ended after a number of steps.

Return 1 - (1 - beta)^steps. Non-positive steps or beta give 0.0 and beta at least 1 gives 1.0.

Hint

Termination is geometric, so survival decays as (1 - beta) per step.

case 1

in: [0.1,1]

expected: 0.09999999999999998

case 2

in: [0.5,3]

expected: 0.875

case 3

in: [0,10]

expected: 0

case 4

in: [1,5]

expected: 1

case 5

in: [0.2,0]

expected: 0

Starter codePython

def option_termination_probability(beta, steps):
    # Your code here
    pass

5 test cases · run your code against them in the editor