Australian School of Business

Probability and Statistics

Solutions Week 4
1. We are given X Exp() so that:
E [X] =

1
.
2

and

V ar (X) =

and

V ar (N ) = .

Also, N Poisson() so that:

E [N ] =
(a) The mean of S is:
E [S] = E [E [S |N ]] = E [N X] = E [N ] E [X] = /.
(b) The variance of S is:
V ar (S) =
=

E [N ] V ar (X) + (E [X])2 V ar (N )
 2
1
1
2+
= 2/2 .

(c) The m.g.f. of S is:

MS (t) = MN (log MX (t)) ,
where
MX (t) =

MN (t) = e(e

and

1)

Thus,
MS (t) = e




log
e ( t ) 1

= exp

t
t

2. Xk Exp(1) implies that fXk (x) = ex for x 0 and zero otherwise, for k = 1, 2, 3. We have that:

0,
if x < 0;
FXk (x) =
1 ex , if x 0,
for k = 1, 2, 3.
Let X(1) = min {X1 , X2 , X3 } and X(3) = max {X1 , X2 , X3 }. Finding the distributions of the minimum
and the maximum, we have:
3

FX(1) (x) = 1 (1 F (x)) = 1 e3x ,

for x 0 and zero otherwise. So that:
fX(1) (x) = 3e3x ,

for x 0,

and zero otherwise. This is Exp(3) and

3

FX(3) (x) = (F (x)) = 1 ex

for x 0 and zero otherwise. So that:
fX(3) (x) = 3ex 1 ex
and zero otherwise.
c Katja Ignatieva

2

3

for x 0,

School of Risk and Actuarial Studies, ASB, UNSW

Page 1 of 9

ACTL2002 & ACTL5101

Probability and Statistics

Solutions Week 4

(a) The joint distribution of X(1) , X(2) , X(3) is given by:
fX(1) ,X(2) ,X(3) (y1 , y2 , y3 )

= 3!f (y1 ) f (y2 ) f (y3 )

= 6e(y1 +y2 +y3 ) ,

for 0 y1 y2 y3 < .


and zero otherwise. Therefore, we get the joint distribution of X(1) , X(3) by integrating over all
possible values of X(2) as:
fX(1) ,X(3) (y1 , y3 )

y3

y1

= 6 e

iy3
h
6e(y1 +y2 +y3 ) dy2 = 6 e(y1 +y2 +y3 )
y1

2y1 y3

y1 2y3

and zero otherwise.

for 0 y1 y3 < ,

(b) We can show that:



E X(1) =3

=3

* using

x exp(cx)dx =



E X(3) =3

=3

Z0

exp(cx)
(cx
c2

Z


x exp(3x)dx


exp(3x)
1
(3x 1)
=
9
3
0

i
1) , and (note exp(a)b = exp(a b)):

y exp(y)(1 exp(y))2 dy
y exp(y) 2y exp(2y) + y exp(3y)dy


exp(y)
exp(2y)
exp(3y)
(y 1) 2
(2y 1) +
(3y 1)
1
4
9
0
11
.
=3 (1 1/2 + 1/9) =
6

=3

(c) We have that (note exp(a)b = exp(a b)):

h

1
E X(1) = 3
x2 exp(3x)dx
9
0


 2
1
2x
2
1
x

+
=3 exp(3x)
3
9
27 0
9
9
 2
Z
i
h




11
2
2
y 2 exp(y)(1 exp(y))2 dy
E X(3) = 3
V ar X(3) =E X(3)
6
0
 2
Z
11
=3
y 2 exp(y) 2y 2 exp(2y) + y 2 exp(3y)dy
6
0

 2


 2
y
2y
2
2y
2
y

2 exp(2y)

+
=3 exp(y)
1
1
1
2
4
8
 2
  2
y
2y
2
11
+ exp(3y)

+
3
9
27 0
6
  2

11
49
1 2

,
=3 (2) + 2
4
27
6
36
i
h
 2
R
2
.
+
** using x2 exp(cx)dx = exp(cx) xc 2x
2
3
c
c

V ar X(1) =E

c Katja Ignatieva

2
X(1)

2

School of Risk and Actuarial Studies, ASB, UNSW

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ACTL2002 & ACTL5101

Probability and Statistics

Solutions Week 4

(d) Now, for:



E X(1) X(3) =

Z0

6x

xyfX,Y (x, y)dydx =




xy 6e(x+y) ex ey dydx

ye e ye
dydx

 y

 2y

Z
e
e

=
6x e2x
dx
(y 1) ex
(2y 1)
1
4
0
x

 x

 2x

Z
e
e
=
6x e2x
(x + 1) ex
(2x + 1)
dx
1
4
0
Z
6
12
=
6x2 e3x + 6xe3x x2 e3x xe3x dx
4
4
Z0
9
=
3x2 e3x + xe3x dx
2
0




 2
9 e3x
2x
2
x
&
+

+
(3x 1)
= 3 e3x
3
9
27 0
2
9
0
32 1
13
=
+ =
.
27
2
18
i
h
R
(cx

1)
,
again * using x exp(cx)dx = exp(cx)
2
c
h
 2
i
R 2
2
** using x exp(cx)dx = exp(cx) xc 2x
+
.
2
3
c
c
Therefore, we have:





 

Cov X(1) , X(3)
= E X(1) X(3) E X(1) E X(3)
  
1
11
1
13
= .

=
18
3
6
9
0

2x

2y

Therefore, the required correlation coefficient is:

X(1) , X(3)

=
3. X Gamma(, 1) implies:
fX (x) =

x1 ex
,
()

Cov X(1) , X(3)
q




V ar X(1) V ar X(3)
1/9
2
p
= .
7
(1/9) (49/36)

for x 0 and MX (t) =

for y 0 and MY (t) =

1
1t

Similarly, Y Gamma(, 1)implies:

fY (y) =

y 1 ey
,
()

1
1t

(a) Using the m.g.f. technique, we have:

i
h
  

 
E eUt = E e(X+Y )t = E eXt E eY t

+
1
MX (t) MY (t) =
1t

MU (t) =
=

which is the m.g.f. of a Gamma( + , 1).

(b) By independence, we note that:
f (x, y) = fX (x) fY (y) =

x1 ex y 1 ey
.
()
()

The inverse of the transformation:

u=x+y
c Katja Ignatieva

and

v=

x
x+y

School of Risk and Actuarial Studies, ASB, UNSW

Page 3 of 9

ACTL2002 & ACTL5101

Probability and Statistics

Solutions Week 4

is given by:
x = uv

and

y = u uv = u (1 v) .

uy
u

uv = u y y = (v 1)u y = (1 v)u
Which is derived by: x = u y v =
x = u u(1 v) x = uv.
Its jacobian is:

h1 (u, v) /u h1 (u, v) /v
v
u
= det

J (u, v) = det
h2 (u, v) /u h2 (u, v) /v
1 v u
=

uv u(1 v) = u.

Thus |J (u, v) | = u, because 0 < u < . By the Jacobian transformation technique, the joint
density of U and V is:
1

fUV (u, v) =

euv [u (1 v)]
eu(1v)
1 (uv)
1/u
()
()

for 0 < u < and 0 < v < 1 and zero otherwise.

(c) Use euv eu(1v) = eu , than we can further simplify the joint density as:
fUV (u, v) =

1
1
+1 u
1
u
(1 v)1 .
|
{z e } |v
{z
}
() ()
{z
} function of u alone function of v alone
|
constant

Thus, we see that we can express the joint density as a product of functions of u alone and v
alone, i.e., fU,V (u, v) = fU (u)fV (v). Therefore, U and V are independent.
(d) Note x, y 0, thus 0

X
X+Y

fU (u) =

X
X

= 1. For the marginal of U , we have

u+1 eu v 1 (1 v)
dv
() ()
0
Z
u+1 eu 1 ( + ) 1
1
v
(1 v)
dv
( + ) 0 () ()
{z
}
|

density of a Beta(,) =1

(+)1 u

e
,
( + )

for u > 0

and zero otherwise. This is the density of a Gamma( + , 1). This reinforces the result in (a).
Note: 0 X + Y . For the marginal of V , we have:
fV (v)

u+1 eu v 1 (1 v)
() ()

du
Z

( + ) 1
1
v
(1 v)
() ()

|0

u+1 eu
du
( + )
{z
}

density of a Gamma(+,1) =1

( + ) 1
1
v
(1 v)
,
() ()

for 0 < v < 1

and zero otherwise. This is the density of a Beta(, ).

(e) Since X = U V and by independence, we have:
E [X] = E [U ] E [V ]

= ( + ) E [V ]

so that
E [V ] =

.
+

Similarly, we have for the variance:



2
V ar (X) = V ar (U V ) = E U 2 V 2 (E [U V ])
   
= E U 2 E V 2 2
c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 4 of 9

ACTL2002 & ACTL5101

Probability and Statistics

so that

Thus, the variance of V is:

Solutions Week 4

  + 2
+ 2
=
.
E V2 =
E [U 2 ]
( + ) (1 + + )
 
E V 2 (E [V ])2

V ar (V ) =

2

+ 2

( + ) (1 + + )
+
( + ) ( + 2 ) 2 (1 + + )
( + )2 (1 + + )

=
=
=

( + ) (1 + + )

4. Xk Exp(1) implies that fXk (x) = ex for x 0 and zero otherwise, for k = 1, 2, 3. We have that:

0,
if x < 0;
FXk (x) =
1 ex , if x 0,
for k = 1, 2, 3.
Let X(1) = min {X1 , X2 , X3 } and X(3) = max {X1 , X2 , X3 }. Finding the distributions of the minimum
and the maximum, we have:
FX(1) (x) = 1 (1 F (x))3 = 1 e3x ,
for x 0 and zero otherwise. So that:
fX(1) (x) = 3e3x ,

for x 0,

and zero otherwise. This is Exp(3) and

3

FX(3) (x) = (F (x)) = 1 ex

for x 0 and zero otherwise. So that:
fX(3) (x) = 3ex 1 ex

2

3

for x 0,

and zero otherwise. The joint distribution of X(1) , X(2) , X(3) is given by:
fX(1) ,X(2) ,X(3) (y1 , y2 , y3 ) =

3!f (y1 ) f (y2 ) f (y3 )

6e(y1 +y2 +y3 ) ,

for 0 y1 y2 y3 < .


and zero otherwise. Therefore, we get the joint distribution of X(1) , X(3) by integrating over all
possible values of X(2) as:
fX(1) ,X(3) (y1 , y3 ) =
=

y3

iy3
h
6e(y1 +y2 +y3 ) dy2 = 6 e(y1 +y2 +y3 )
y1

y1

6 e

2y1 y3

y1 2y3

and zero otherwise.

for 0 y1 y3 < ,


(a) First, we find the conditional density of X(3) X(1) and by definition,
fX(3) |X(1) (y3 |y1 ) =

fX(1) X(3) (y1 , y3 )

fX(1) (y1 )

6 e2y1 y3 ey1 2y3
,
3e3y1

for 0 y1 y3 < ,

and zero otherwise.

Replacing y1 = x and y3 = y, we have:


fX(3) |X(1) (y |x ) = 2 e(xy) e2(xy) , for 0 x y < ,
c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 5 of 9

ACTL2002 & ACTL5101

Probability and Statistics

and zero otherwise. Thus,




E X(3) X(1) = x
=

2ex (x + 1)ex 2e2x

yecy dy =

 ecy
2



2y e(xy) e2(xy) dy
x
 2y

 y

2x e
x
(2y 1)
2e e (y 1) x 2e
4
x

* using

Solutions Week 4

e2x
(2x + 1)
4

3
x+ ,
2

=

(cy 1) .

c

(b) Similarly, we can find the conditional density of X(1) X(3) as:


2 e2y e(y+x)
,
for 0 y x < ,
fX(1) |X(3) (y |x ) =
2
(1 ex )

and zero otherwise. Thus,



E X(1) X(3) = x


2 e2y e(y+x)

dy
2
(1 ex )

 2x
x
 y
x
e
2
x

(2y 1) e
e (y 1) 0
(1 ex )2
4
0
0

2xe2y e2y + 1 + 4xe2x + 4e2x 4ex

2(1 ex )2

 2y
2
1
e
2x
x
=

(2x 1) + + e
(x + 1) e
(1 ex )2
4
4


1 4ex + 3e2x + 2xe2x
=
,
2
2 (1 ex )

(cx 1) .
=

R
 cx
* using xecx dx = ec2
(c) Already derived earlier.
(d) We use Jacobian transformation by first letting:
R = X(3) X(1)

and

S = X(1)

with the inverse transformation:

X(1) = S

and

X(3) = R + S.

The Jacobian of this transformation is given by:

S /R
S /S
0 1
= det
= 1.
J (R, S) = det
(R + S) /R (R + S) /S
1 1
Thus, |J (R, S) | = 1 and

fR,S (r, s) =
=



6 e2srs es2(r+s)


for 0 s < r + s < ,
6e3sr 1 er ,

and zero otherwise, where the range is equivalently:

0s<

and

0 r < .

Thus, the marginal density of R is obtained by integrating all possible values of S:

Z


6e3sr 1 er ds
fR (r) =
0




1 3sr
= 6 1 er
e
3
0
r


e
r

= 6 1e

3
for 0 r < ,
= 2er 1 er ,

and zero otherwise.

c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 6 of 9

ACTL2002 & ACTL5101

Probability and Statistics

Solutions Week 4

5. Use the m.g.f. technique. Recall that if X N , 2 , then
1

MX (t) = et+ 2

2 2

(a) Let S = X1 + X2 .
i
h




E e(X1 +X2 )t = E eX1 t E eX2 t

MS (t) =

1 2

1 2

e 2 t e 2 t = e 2 (2)t

=
which is the m.g.f. of a N (0, 2).
(b) Let D = X1 X2 .
MD (t) =
=

i
i
h
 h

E e(X1 X2 )t = E eX1 t E eX2 (t)
1 2

e 2 t e 2 (t) = e 2 (2)t

which is the m.g.f. of a N (0, 2). Thus, D has the same distribution as S.
(c) Now, assume that they are no longer independent and has the bivariate normal density:




1
1
2
2
.
exp
x

2x
x
+
x
fX1 ,X2 (x1 , x2 ) = p
1
2
2
2 (1 2 ) 1
2 1 2

Using Jacobian transformation technique, we find the joint distribution of S and D. From
S = X1 + X2

and

D = X1 X2

and

X2 =

the inverse of this transformation is

X1 =

1
(S + D)
2

1
(S D) ,
2

X1 = S SD
= S+D
which is derived by X1 = S X2 D = S X2 X2 X2 = SD
2
2
2 .
Its Jacobian is:

(S + D)/2 /S (S + D)/2 /D
1/2 1/2
= det
= 1/41/4 = 1/2.
J (S, D) = det
(S D)/2 /S (S D)/2 /D
1/2 1/2
Thus |J (S, D) | = 1/2. Therefore,
fS,D (s, d) =
=
=
=

"

2

#!
1
1
1
(s + d) 2 21 (s + d)
2
p



2

exp
2
1
1
2
2 (1 )
|2|
2 (s d) + 2 (s d)
2 1






1
1
p
exp
s2 + d2 2 s2 d2 + s2 + d2
2)
2
8
(1

4 1




1
1
2
2
p
exp
(1

)
s
+
(1
+
)
d
4 (1 2 )
4 1 2




s2
d2
1
p
exp
exp
4 (1 + )
4 (1 )
4 1 2
1

Therefore, clearly we can write the density as a product of functions of s alone and d alone. S
and D are therefore independent.
(d) We have that the p.d.f. of X is given by:
fX (x) =

x1 ex ,
()

if x > 0,

and zero otherwise.

1. The transformation g(X) = 1/X is a monotonic decreasing function for x > 0, because
1
dx
dg(x)
2
< 0 for x > 0. Hence, we can apply the CDF technique, with
d x = d x = x

c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 7 of 9

ACTL2002 & ACTL5101

Probability and Statistics

g(Y ) = 1/X, g 1 (Y ) = 1/Y , and

g() = 0 we have:

g1 (Y )
y

y1
y

fY (y) = fX (g 1 (y))

Solutions Week 4

= y 2 < 0, support of Y : g(0) = ,

1
g (y)
y

 1

1
=

e y y 2
()
y

(y)+1 e y y 2
=
()

y 1 e y
=
()
for y > 0 and zero otherwise.
2. The c.d.f. of the inverse gamma distribution, as function of the c.d.f. of the gamma distribution, is given by applying the CDF technique:
FY (y) =1 FX (g 1 (y))
=1 FX (1/y).
6.

I. C
A t-distribution is obtained by a standard normal r.v. divided by the square root of a chi-squared
r.v. divided by its degree of freedom.
2
N (0, 1) (see lecture notes).
We have Z1 + Z2 N (0, 2), i.e., Z1+Z
2
ri /2

For a chi-squared distribution we have the m.g.f.: MVi (t) = (1 2 t)

r1 /2

MV1 (t) MV2 (t) = (1 2 t)

(1 2 t)

(r1 +r2 )/2

= (1 2 t)

for i = 1, 2. Hence,

r2 /2

which is the m.g.f. of a chi-squared distribution with r1 + r2 degrees of freedom. Hence, V1 + V2

has a chi-squared distribution with r1 + r2 degrees of freedom.
II. E
See lecture notes/ previous question.
III. C
We have:
Z1 + Z2 N (0, V ar(Z1 ) + V ar(Z2 ) + 2Cov(Z1 , Z2 ))
N (0, 1 + 1 + 2 1 1)
N (0, 2 + 2)
N (0, 2 (1 + )) .
Thus V ar

Z1
+Z2
2

2(1+)
2

= 1 + 6= 1.

IV. D
1
We have MXk (t) = (1 t/)
for k = 1, . . . , n. Let Yk = Xk /n, then we have: MYk (t) =


t 1
MXk /n (t) = MXk (t/n) = 1 n
for k = 1, . . . , n.
Using the m.g.f. technique we determine the distribution of the sample mean by the m.g.f.:
MX (t) =MY1 (t) . . . MYn (t)
n

t
= 1
n
which is the m.g.f. of a Gamma distribution with parameters n and n.
V D
Use the m.g.f. technique. MXk (t) = exp((exp(t) 1)) for k = 1, . . . , n. We have:
MS (t) =MX1 (t) . . . MXn (t)
Y
=
n exp((exp(t) 1))
k=1

= exp((exp(t) 1))n
= exp(n (exp(t) 1)),

which is the m.g.f. of a Poisson r.v. with mean n.

c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 8 of 9

ACTL2002 & ACTL5101

Probability and Statistics

Solutions Week 4

VI. B
We have:




Pr X(20) > 20 =1 Pr X(20) 1
20

=1 (FX (1))

20

=1 (1 exp(2))

VII. D
We have:
FX (x) =

Let U = X(n) , then:

if x 0;
0,
Rx
 2 x
2
2xdx
=
x
=
x
,
if 0 < x < 1;
fX (x)dx =
0
0
1,
if x 1.
n1

fU (u) =n fX (u) (FX (u))

=n 2u u2(n1) ,
for u [0, 1] and zero otherwise.
Thus we have:
Z
E [U ] =

=2n

ufU (u)du =

un 2u u2(n1) du

u2n du

u2n+1
2n + 1
2n
=
.
2n + 1
=2n

1
0

VIII. E
We have that X U (8.5, 10.5), then fX (x) =
have:

0,
x8.5
,
FX (x) =
2
1,

1/2 if x [8.5, 10.5] and zero otherwise and we

if x < 8.5;
if 8.5 x 10.5;
if x > 10.5.

Then we have: Pr(loser will not break world record) = Pr X(8) 9.9 = 1 Pr X(8) < 9.9 =
1 FX (9.9)8 = 1 0.78 .
-End of Week 4 Tutorial Solutions-

c Katja Ignatieva

School of Risk and Actuarial Studies, ASB, UNSW

Page 9 of 9