Variance of Uncorrelated Bets - Quant Trader Interview Question
Difficulty: Medium
Category: Betting Games
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: probability, variance, expected-value, independent-events, mental-math
Problem Description
You are simultaneously placing two independent bets.
Bet A: You risk 100 dollars to win 50 dollars. The probability of winning is 60%.
Bet B: You risk 50 dollars to win 100 dollars. The probability of winning is 40%.
What is the variance of your total profit/loss from these two bets combined?
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