Continuous Probability

Distributions

Continuous Random Variables and

Probability Distributions

Random Variable: Y
Cumulative Distribution Function (CDF): F(y)=P(Yy)
Probability Density Function (pdf): f(y)=dF(y)/dy
Rules governing continuous distributions:
f(y) 0 y

f ( y )dy 1

P(aYb) = F(b)-F(a) =

P(Y=a) = 0 a

f ( y )dy

Expected Values of Continuous RVs

Expected Value : E (Y ) yf ( y )dy (assuming absolute convergence)

E g (Y ) g ( y ) f ( y )dy

y 2 y f ( y )dy y f ( y )dy 2
E Y 2 ( ) (1) E Y

Variance : V (Y ) E (Y E (Y )) ( y ) 2 f ( y )dy
2

yf ( y )dy

E aY b (ay b) f ( y )dy a yf ( y )dy b f ( y )dy

a( ) b(1) a b

V aY b E (aY b) E (aY b)

(ay a ) f ( y )dy a

aY b a

(ay b) (a b) f ( y )dy

( y ) 2 f ( y )dy a 2V (Y ) a 2 2

f ( y )dy

Example Cost/Benefit Analysis of

Sprewell-Bluff Project (I)
Subjective Analysis of Annual Benefits/Costs of
Project (U.S. Army Corps of Engineers assessments)
Y = Actual Benefit is Random Variable taken from a
triangular distribution with 3 parameters:
A=Lower Bound (Pessimistic Outcome)
B=Peak (Most Likely Outcome)
C=Upper Bound (Optimistic Outcome)

6 Benefit Variables
3 Cost Variables
Source: B.W. Taylor, R.M. North(1976). The Measurement of Uncertainty in Public Water Resource
Development, American Journal of Agricultural Economics, Vol. 58, #4, Pt.1, pp.636-643

Example Cost/Benefit Analysis of

Sprewell-Bluff Project (II) ($1000s, rounded)
Benefit/Cost

Pessimistic (A) Most Likely (B)

Optimistic (C)

Flood Control (+)

850

1200

1500

Hydroelec Pwr (+)

5000

6000

6000

Navigation (+)

25

28

30

Recreation (+)

4200

5400

7800

Fish/Wildlife (+)

57

127

173

Area Redvlp (+)

830

1192

Capital Cost (-)

-193K

-180K

-162K

Annual Cost (-)

-7000

-6600

-6000

Operation/Maint(-)

-2192

-2049

-1742

Example Cost/Benefit Analysis of SprewellBluff Project (III) (Flood Control, in $100K)

Triangular Distribution with:
lower bound=8.5
Peak=12.0

8.5 y 12.0
k ( y 8.5) 3.5

f ( y ) k (15.0 y ) / 3.0 12.0 y 15.0

0
elsewhere ( y 8.5, y 15.0)

upper bound=15.0
Choose k area under density curve is 1:
Area below 12.0 is: 0.5((12.0-8.5)k) = 1.75k
Area above 12.0 is 0.5((15.0-12.0)k) = 1.50k
Total Area is 3.25k k=1/3.25

Example Cost/Benefit Analysis of

Sprewell-Bluff Project (IV) (Flood Control)
( y 8.5) 11.375 8.5 y 12.0

f ( y ) (15.0 y ) / 9.75 12.0 y 15.0

0
elsewhere

y 8.5 F ( y ) 0

8.5 y 12 F ( y ) (t 8.50) 11.375 dt (1 / 11.375) t 2 2 8.5t

8.5

y
8.5

12 y 15 F ( y ) F (12) (15 t ) 9.75 dt .5385 (1 / 9.75)15t t 2

.5385 15 y y 2 15(12) 12 2 9.75
.5385 216 30 y y 19.5 12 y 15

y 2 8.5 y 8.5 2 8.5 11.375 y

y 12 F ( y ) 1

17 y 8.52 22.75

12

y
12

Example Cost/Benefit Analysis of

Sprewell-Bluff Project (V) (Flood Control)
( y 8.5) 11.375 8.5 y 12.0

f ( y ) (15.0 y ) / 9.75 12.0 y 15.0

0
elsewhere

y 8.5
0
3.175824 0.747253 y 0.043956 y 2
8.5 y 12

F ( y)
2

10
.
538462

1
.
538462
y

0
.
051282
y
12 y 15

1
y 15

Example Cost/Benefit Analysis of Sprewell-Bluff Project (VI) (Flood Control)

Example Cost/Benefit Analysis of Sprewell-Bluff Project

(VII) (Flood Control)

12

E (Y ) yf ( y )dy y

8.5

15 15 y
y3
y 8 .5
8.5 y 2
dy y
dy 29.25 19.5
12
9.75
11
.
375

12

15 y 2
y3

22
.
75
34
.
125

8 .5

15

12

123
8.5(12) 2 8.53 8.53 153
153 15(12) 2
123

29
.
25
19
.
5
29
.
25
19
.
5
22
.
75
34
.
125
22
.
75
34
.
125

59.08 62.77 21.00 31.49 148.35 98.90 94.95 50.64

3.69 10.49 49.45 44.41 11.84

E Y2

15
y 4 8.5 y 3
2
2 y 8.5
2 15 y
y f ( y )dy y
dy 12 y 11.375 dy 39 29.25

8 .5
9
.
75

12

12

15 y 3
y4

34
.
125
45
.
5

8.5

12 4 8.5(12)3 8.54 8.54 154

154 15(12)3 12 4

39
29
.
25
39
29
.
25
34
.
125
45
.
5
34
.
125
45
.
5

531.69 502.15 133.85 178.46 1483.52 1112 .64 759.56 455.74

29.54 44.61 370.88 303.82 141.21

V (Y ) E Y 2 E (Y ) 141.21 11.84 2 141.21 140.19 1.02

1.02 1.01

15

12

Uniform Distribution
Used to model random variables that tend to occur
evenly over a range of values
Probability of any interval of values proportional to its
width
Used to generate (simulate) random variables from
virtually any distribution
Used as non-informative prior in many Bayesian
analyses

1
b a
f ( y)

a yb
elsewhere

0
ya
F ( y)
ba
1

ya
a yb
yb

Uniform Distribution - Expectations

E (Y )

E Y2

1
1 y
y
dy

ba
ba 2

2 b

b 2 a 2 (b a )(b a ) b a

2(b a )
2(b a )
2

3 b

1
1 y
y
dy

a
b

b 3 a 3 (b a )(a 2 b 2 ab)

3(b a )
3(b a )

(a 2 b 2 ab)

V (Y ) E Y 2 E (Y )
2

(a b ab) b a

3
2
2

4(a 2 b 2 ab) 3(b 2 a 2 2ab) a 2 b 2 2ab (b a ) 2

12
12
12
(b a ) 2 b a

0.2887(b a )
12
12

Exponential Distribution
Right-Skewed distribution with maximum at y=0
Random variable can only take on positive values
Used to model inter-arrival times/distances for a
Poisson process
1 y /
e

y0

elsewhere

f ( y)

F ( y)

1 t
1
e dt

1 t
e

y
0

e y e 0 1 e y

y0

Exponential Density Functions (pdf)

Exponential Cumulative Distribution Functions (CDF)

Gamma Function

( ) y 1e y dy
0

( 1) y e y dy Integrating by Parts :
0

u y du y 1dy
dv e y dy v e y

( 1) y e dy uv vdu y e
y

y 1e y dy
0

0 (0) y 1e y dy ( ) (Recursive Property)

0

Note that if is an integer, ( ) ( 1)!

Consider the integral :
y x dy dx

y
0

1 y

EXCEL Function:

y 1e y dy

dy ( x )
0

1 x

Letting x y :

e dx

=EXP(GAMMALN(

x 1e x dx ( )

Exponential Distribution - Expectations

E (Y )

1 y
1 y
2 1 y
y e
dy

ye
dy

y
e dy

0
0

1
(2) 2 (2 1)!

1 2 y
2
2 1 y
E Y y e
dy y e dy y 31e y dy

0
0
0

1
(3) 3 2 (3 1)! 2 2

2
V (Y ) E Y 2 E (Y ) 2 2 ( ) 2 2

Exponential Distribution - MGF

M (t ) E etY

1
t

1 y
ty 1 y
e e
dy 0 e

1t

dy

1 y *

*
dy e
dy
where
0

1 t
1 1 y *
*
*
1
1
M (t )
e

(
0

1
)

(
1

t
)

0
1 *

1 t
1 y
e
0

M ' (t ) 1(1 t ) 2 ( ) (1 t ) 2
M ' ' (t ) 2 (1 t ) 3 ( ) 2 2 (1 t ) 3
E (Y ) M ' (0)
V (Y ) M ' ' (0) M ' (0) 2 2 2 2
2

Exponential/Poisson Connection
Consider a Poisson process with random variable X being
the number of occurences of an event in a fixed time/space
X(t)~Poisson(t)
Let Y be the distance in time/space between two such
events
Then if Y > y, no events have occurred in the space of y
Exponential "Survival ": P (Y y ) e y
e y ( y ) 0
Poisson Probability : P ( X ( y ) 0)
e y
0!
1 Inter - arrivals distances in Poisson Process are Exponential with mean 1

Gamma Distribution

Family of Right-Skewed Distributions

Random Variable can take on positive values only
Used to model many biological and economic characteristics
Can take on many different shapes to match empirical data

1
1 y
( ) y e

y 0, , 0

otherwise

f ( y)

Obtaining Probabilities in EXCEL:

To obtain: F(y)=P(Yy)

Use Function:

=GAMMADIST(y,,1)

Gamma/Exponential Densities (pdf)

Gamma Distribution - Expectations

1
1
1 y
y

E (Y ) y
y
e
dy

y
e dy

0
( )
( )

1
1
( 1)
( 1) 1 y
1

y
e dy
( 1)

( )
( )
( )
( )

( )

1
1
1 y
1 y

E Y y
y
e
dy

y
e dy

0
( )
( )

1
1
( 2) 2
( 2 ) 1 y
2

y
e dy
( 2)

( )
( )
( )

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

( 1)
( )
( )

V (Y ) E Y 2 E (Y ) ( 1) ( ) 2 2 2 2 2 2 2

Gamma Distribution - MGF

M (t ) E e

tY

1
1 y
dy
y
e

( )

ety

1
t

1 t

1
1
1
1
y
e
dy

y
e
0
0
( )
( )

1 y *
*

y
e
dy
where

( ) 0
1 t
1
*

M (t )

(
1

t
)
( )

dy

M ' (t ) (1 t ) 1 ( ) (1 t ) 1
M ' ' (t ) ( 1) (1 t ) 2 ( ) ( 1) 2 (1 t ) 2
E (Y ) M ' (0)
V (Y ) M ' ' (0) M ' (0) ( 1) 2 ( ) 2 2
2

Gamma Distribution Special Cases

Exponential Distribution
Chi-Square Distribution ( integer)

E(Y)= V(Y)=2
M(t)=(1-2t)-
Distribution is widely used for statistical inference
Notation: Chi-Square with degrees of freedom:

Y~

Normal (Gaussian) Distribution

Bell-shaped distribution with tendency for individuals to
clump around the group median/mean
Used to model many biological phenomena
Many estimators have approximate normal sampling
distributions (see Central Limit Theorem)

f ( y)

1
2

1 ( y )2

2 2

y , , 0

Obtaining Probabilities in EXCEL:

To obtain: F(y)=P(Yy)
Use Function:

=NORMDIST(y,,,1)

Normal Distribution Density Functions (pdf)

Normal Distribution Normalizing Constant

Consider the integral : e

( y )2

dy k

2 2

Changing variables : z

k e

( y )2
2

(we want to solve for k )

y
dz 1

dy dz

dy

dy e

z2
2

z2

k
dz e 2 dz

1
1
2
z12 z 22
k
2
2
e dz1 e dz 2 e 2
dz1dz 2

Changing to Polar Co - Ordinates :
z1 r cos , z 2 r sin with domains : r (0, ), [0,2 ) and dz1dz 2 rdrd
z2

1 2 2
z1 z 2
2

1
r2
2

z2

r 0

dz1dz 2

1
r 2 cos 2 sin 2
2

rdrd

d (0 (1))d d

2 k 2 2 2 k 2 2

1
r2
2

rdrd

(cos 2 sin 2 1)

Obtaining Value of

From Previous slide, we get : e

z2 2

e
0

z2 2

1
dz
2

dz 2

1
1 2 1 u
Now, Consider : u
e du u 1 2 e u du
0
0
2

z2
Changing Variables : u
du zdz
2
z
1

0
2
2
2

2 e
0

z2 2

1 2

z2 2

zdz

1
dz 2
2

1 z2 2
2 e
zdz
z

Normal Distribution - Expectations

1

1 2 z2
Z ~ N (0,1) f ( z )
e
2

1
e
2

E ( Z ) z

EZ

dz

1
2

1 12 z 2

dz 2
e

z
2

1
z2
2

ze

1
z2
2

dz
2

z e

1
z2
2

1
2

1
z2
2

0 (0) 0

dz

1
du zdz
2
1 2 12 z 2
2 12 z 2
2
u 2 1
ze
zdz

u
e
z e dz
du

0
0
0
2
2
2
2

Changing Variables : u z 2 du 2 zdz

3 2 1

Note : If Y ~ N ,

u 2

1
1 1 1 3 / 2 23 2
3 32
du
2
1
2
2 2
2 2 2
2 2

V ( Z ) E Z 2 E ( Z ) 1 0 2 1 1
2

then Y Z

E (Y ) E ( Z ) E ( Z ) (0)
V (Y ) V ( Z ) 2V ( Z ) 2 (1) 2

Normal Distribution - MGF

M (t ) E e

tY

2
1 y
1
exp
dy

2 2
2 2
2

e
ty

y2
y 2
exp

ty

2 2 2 2 2 dy

y2
y ( t 2 ) 2

exp 2
2 dy
2
2
2

2
2

Completing the square : ( t 2 ) 2 2 2 t 2 t 2

1

M (t )

2
1

exp

y2
y ( t 2 ) 2 2t 2 t 2
2

2
2
2 2

1 y ( t 2 )

exp
2
2
2
2
1

y2
y ( t 2 ) 2 2t 2 t 2
2
2
2
2
2
2 2

exp

2 t 2 t 2
exp
2 2

2
2
2t t
2

2t 2 t 2
M (t ) exp
2 2

t 2 2
exp t

2t 2 t 2

2 2

2 t 2 t 2

2 2

dy

dy

dy

1 y ( t 2 )
exp

2
2

2
2
The last integral being 1, since it is integrating over the density of
2

dy


a normal R.V. :

Y ~ N t 2 , 2

Normal(0,1) Distribution of Z2

1 z
e
2

M Z 2 (t ) E etZ e tz
2

2
2

1 2 t

z2

dz

2
e

dz

1 2 t

1
2

dz

Changing Variables : u z z u and dz

M Z 2 (t )

2
e

1
1

2 2
Z 2 ~ 12

1 2 t

1 2t

1
2 u

12

du

dz

z2

1
t
2

z2

1
2

2 u

du

2
1

1 u
1 2 t
2

du

(1 2t ) 1 2 (1 2t ) 1 2
2

Beta Distribution
Used to model probabilities (can be generalized to
any finite, positive range)
Parameters allow a wide range of shapes to model
empirical data
( ) 1
1
y
(
1

y
)
0 y 1, , 0
( )( )

f ( y)

otherwise

Obtaining Probabilities in EXCEL:

To obtain: F(y)=P(Yy)
Use Function:

=BETADIST(y,a,b)

Beta Density Functions (pdf)

Weibull Distribution

y0

F ( y)

y
1 exp

y 0 ( , 0)

y
dF ( y )
1

f ( y)
y exp
dy

E (Y )

1
y

y y exp

y
1

y exp

for y 0

dy

y
y 1
Changing variables : u
du
dy and y (u )1

1
1
dy (u )1 e u du 1 u1 e u du 1 1
E (Y ) y y exp
0
0
0

EY

1
y

y y exp

2
dy (u ) 2 e u du 2 u 2 e u du 2 1
0
0

2
1
2
V (Y ) E Y 2 E (Y ) 2 1 2 1

Note: The EXCEL function WEIBULL(y, uses parameterization: *=

Weibull Density Functions (pdf)

Lognormal Distribution

2y

f ( y)

1 log y

y 0, , 0

otherwise

Note : Y * ln(Y ) ~ N , 2

2 12
E (Y ) E e M Y * (t 1) exp (1)
2

2
Y* 2
2Y *
EY E e
Ee
M Y * (t 2) exp

Y*

V (Y ) E Y E (Y ) e
2

2 2

e 2

Obtaining Probabilities in EXCEL:

To obtain: F(y)=P(Yy)
Use Function:

2 2

2 22
2 2
e
(2)
2

=LOGNORMDIST(y,,)

Lognormal pdfs