CONCEPTUAL TOOLS

By: Neil E. Cotter PROBABILITY

LINEAR FUNCS OF RAND VARS

TOOL: Given probability density function, fX(x), for X, the probability density function (pdf),
fY(y) for Y = aX + b, (a ≠ 0),

is
1  y − b
fY (y) = fXx = .
a  a 

Also, the mean and variance transform as follows:

µY = aµ X + b σY2 = a 2σ 2X .
€

PROOF: By definition, fY(y) is the derivative of the cumulative probability

€ distribution function.
d d
fY (y) = FY (y) = P(Y ≤ y)
dy dy

Making a direct substitution for Y, we have an expression that we can

transform into a statement about the probability of X:
€
d  y − b
 P X ≤  a>0
d d  dy  a 
P(Y ≤ y) = P(aX + b ≤ y) = 
dy dy  d P X ≥ y − b  a < 0
 dy  a 


The last expressions are statements about the cumulative distribution

function of X.
€
 d  y − b
 FX  x =  a>0
 dy  a 
fY (y) = 
 d 1− F  x = y − b  a < 0
 dy  X 
 a 

Using the chain rule from calculus, it is possible to write the above
derivatives in terms of x:
€
 d  y − b  dy
 FX  x =  a>0
 dx  a  dx
fY (y) = 
 d 1− F  x = y − b  dy a<0
 dx  X 
 a  dx

€
CONCEPTUAL TOOLS
By: Neil E. Cotter PROBABILITY
LINEAR FUNCS OF RVS (CONT.)

The derivatives in terms of x are probability density functions for X, and

the derivatives of y = ax + b are equal to a:
  y − b
 fXx = a a > 0
  a 
fY (y) = 
− f  x = y − b  a a < 0
 X  a 


This may be written more compactly as follows:

1  y − b
€ fY (y) = fXx = , a≠0
a  a 

For the mean of Y, we write the integral formula:

∞
€ µY = E(aX + b) = ∫−∞ (ax + b) f X (x)dx
We rewrite the integral in two parts and exploit the property that the area
under the pdf is equal to one:
€
∞ ∞
µY = a ∫ xf (x)dx + b ∫
f (x)dx = aµ X + b
−∞ X −∞ X

For the variance, we substitute for Y in the variance formula:

€ σY2 = E([Y − µY ]2 ) = E([aX + b − (aµ X + b)]2 )

or

€ σY2 = E(a 2 [X − µ X ]2 ) = a 2 E([X − µ X ]2 ) = a 2σ 2X