Martingales and Stopping Times
A stopping time with respect to a sequence of random variables X1, X2, X3, ... is a random variable τ with the property that for each t, the occurrence or non-occurrence of the event τ = t depends only on the values of X1, X2, X3, ..., Xt. The intuition behind the definition is that at any particular time t, you can look at the sequence so far and tell if it is time to stop. An example in real life might be the time at which a gambler leaves the gambling table, which might be a function of his previous winnings (for example, he might leave only when he goes broke), but he can't choose to go or stay based on the outcome of games that haven't been played yet.
In some contexts the concept of stopping time is defined by requiring only that the occurrence or non-occurrence of the event τ = t be probabilistically independent of Xt + 1, Xt + 2, ... but not that it be completely determined by the history of the process up to time t. That is a weaker condition than the one appearing in the paragraph above, but is strong enough to serve in some of the proofs in which stopping times are used.
One of the basic properties of martingales is that, if is a (sub-/super-) martingale and is a stopping time, then the corresponding stopped process defined by is also a (sub-/super-) martingale.
The concept of a stopped martingale leads to a series of important theorems, including, for example, the optional stopping theorem which states that, under certain conditions, the expected value of a martingale at a stopping time is equal to its initial value.
Read more about this topic: Martingale (probability Theory)
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