Stochastic Models I (for first-year doctoral students)

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Stochastic Models I (for first-year doctoral students)

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Justify your answers; show your work.

1. Exponential Random Variables (23 points)

Let X

1

and X

2

be independent exponential random variables with means E[X

1

] 1/

1

and E[X

2

] 1/

2

. Let

M

1

min{X

1

, X

2

} and M

2

max {X

1

, X

2

}.

Compute and derive the following quantities:

(a) P(M

1

> t, M

1

= X

1

),

summary page.

P(M

1

> t, M

1

= X

1

) =

_

t

f

X

1

(x)F

c

2

(x) dx

=

_

t

1

e

1

x

e

2

x

dx

=

_

e

(

1

+

2

)t

_

_

1

1

+

2

_

= P(M

1

> t)P(M

1

= X

1

), (1)

showing independence of the two marginal distributions in the last line.

(b) P(M

1

> t|M

1

= X

1

),

1

> t|M

1

= X

1

) = P(M

1

> t) = e

(

1

+

2

)t

.

(c) V ar(M

1

+M

2

),

Since M

1

+M

2

= X

1

+X

2

, V ar(M

1

+M

2

) =

2

1

+

2

2

.

(d) P(M

1

> t

1

, M

2

> t

2

).

1

< t

2

. If t

1

t

2

, then

P(M

1

> t

1

, M

2

> t

2

) = P(M

1

> t

1

) = e

(

1

+

2

)t

1

.

Hence, assume that t

1

< t

2

. It is convenient to rewrite, getting

P(M

1

> t

1

, M

2

> t

2

) = P(M

1

> t

1

) P(M

1

> t

1

, M

2

t

2

).

Then

P(M

1

> t

1

, M

2

t

2

) = P(t

1

< X

1

< t

2

)P(t

1

< X

2

< t

2

)

= (e

1

t

1

e

1

t

2

)(e

2

t

1

e

2

t

2

)

so that

P(M

1

> t

1

, M

2

> t

2

) = e

(

1

+

2

)t

1

(e

1

t

1

e

1

t

2

)(e

2

t

1

e

2

t

2

)

= e

1

t

1

2

t

2

+e

1

t

2

2

t

1

e

1

t

2

2

t

2

.

1

=

2

= . Compute the probability density function (pdf) of

X

1

X

2

.

1

=

2

= the pdf of X

1

X

2

is the

symmetric bilateral exponential distribution f(x) = (/2)e

|x|

on the entire real line. In

detail, for x > 0,

f

X

1

X

2

(x) =

_

x

f

X

1

(y)f

X

2

(y x) dy =

2

e

x

.

The reasoning is essentially the same for x < 0.

For a random variable Y with pdf f

Y

(x), let

Y

() be its characteristic function (cf),

dened by

Y

() E

_

e

iY

_

=

_

+

e

ix

f

Y

(x) dx ,

where i

Y

is an integrable function,

the pdf f

Y

can be recovered from the cf by the inversion formula

f

Y

(x) =

1

2

_

+

e

ix

Y

() d . (2)

(ii) If E[|Y |

k

] < , then

Y

has a continuous k

th

derivative given by

(k)

Y

() =

_

+

(ix)

k

e

ix

f

Y

(x) dx.

(a) In the setting of Problem 1 (e), compute the cf of X

1

X

2

.

By elementary calculations,

X

1

() =

i

and

X

2

() =

+i

.

Hence

(X

1

X

2

)

() =

X

1

()

X

2

() =

2

2

+

2

.

2

(b) Suppose that Y is a Cauchy random variable (centered at 0) with positive scale param-

eter ; i.e., suppose that Y has pdf

f

Y

(x)

(

2

+x

2

)

, < x < + . (3)

Show that Y has cf

Y

() = e

||

. (Hint: Use parts 1 (e) and 2 (a) with (2).)

Given the answers to parts 1 (e) and 2 (a), we can directly apply the inversion formula,

as suggested. This is a standard duality for characteristic functions. See Section XV.2 of

Feller, vol. II. These are examples 7 and 8 in Table 1 on p. 503. By the inversion formula

f

Y

(x) =

1

2

_

+

e

ix

Y

() d

=

1

2

_

+

e

ix

e

||

d

=

1

_

+

e

ix

2

e

||

d

=

_

1

__

2

2

+ (x)

2

_

=

(

2

+x

2

)

,

where the fourth line follows from part (a). Notice that the integral has the same form with

x here playing the role of in part (a).

(c) What does Property (ii) above and part (b) imply about E[|Y |]?

This question applies basic calculus or real analysis. The absolute value appearing in the cf

implies that the cf is not dierentiable. Thus, by the theorem quoted previously, the mean of

|Y |, E[|Y |], must not be nite. It is not dicult to see that the mean must be innite directly,

because

x

2

f

Y

(x) / as x .

Hence, xf

Y

(x) = O(1/x), so that we must have

_

0

xf

Y

(x) dx =

_

0

|x|f

Y

(x) dx = .

1

, Y

2

, . . . are i.i.d. random variables with the Cauchy pdf in (3) and let

Y

n

(Y

1

+ +Y

n

)/n for n 1. Use part (c) to describe the asymptotic behavior of

Y

n

and

Y

n

as n .

From part (c), we know that the standard LLN does not apply: The SLLN requires that

the random variables being added have nite mean. Hence, we do not have

Y

n

E[Y ] = 0

3

as n . (In particular, the mean of Y does not exist and so is not actually 0, despite the

symmetry. Hence,

Y

n

does not converge to any constant as n .) In fact, we can say much

more: Using the cf, we immediately see that the average

Y

n

has a distribution independent of

n, i.e., is the same as Y

1

:

Y

n

() =

Y

(/n)

n

= (e

|/n|

)

n

= e

||

=

Y

().

Hence, trivially, the average

Y

n

converges in distribution to the original Cauchy law, i.e.,

Y

n

Y

1

as n .

As a consequence, the limit exists (in distribution), but the limit has a nondegenerate dis-

tribution. Since,

Y

n

Y

1

, it follows that

n

Y

n

diverges. In particular, we do not have the

conventional central limit theorem holding here.

Let {Y

n

: n 1} be a sequence of i.i.d. (independent and identically distributed) exponen-

tial random variables, each having mean 1. For n 4, let X

n

= 1 if Y

n

= max {Y

n

, Y

n1

, Y

n2

, Y

n3

};

otherwise, let X

n

= 0. Also let X

1

= X

2

= X

3

= 0. For n 1, let Z

n

= n

2

if Y

n

2 =

max {Y

1

, Y

2

, . . . , Y

n

2

1

, Y

n

2}.

(a) (2 points) Determine the mean and variance of X

n

, and the covariance cov(X

n

, X

n+1

)

for n 4.

Since the distribution is continuous, the probability of any multiple values (ties) is zero. The

ordering of the vector (Y

1

, . . . , Y

n

) can be represented as a random permutation of the vector

(1, 2, . . . , n), where k denotes the k

th

smallest. For example, for n = 3, if Y

2

> Y

3

> Y

1

, then the

outcome is (1, 3, 2). The key property is that all n! permutations are equally likely. There are

(n1)! permutations with the maximum element in the right place. Each one is equally likely

to be the maximum. Hence, E[X

n

] = E[X

2

n

] = 1/4, so that V ar(X

n

) = 1/4 (1/4)

2

= 3/16.

The random variables X

n

and X

n+1

are dependent. We see that we have X

n

X

n+1

= 1

if and only if among 5 consecutive Y

i

(i = n 3, . . . n + 1), Y

n+1

is the maximum, and then

Y

n

is the second largest. The rst event happens with probability 1/5. The second event,

conditional on the rst, happens with probability 1/4. Hence

E[X

n

X

n+1

] = (1/5) (1/4) = 1/20.

so that

cov(X

n

, X

n+1

) = E[X

n

X

n+1

] E[X

n

]E[X

n+1

] =

_

1

20

_

_

1

4

_

2

= 1/80.

The successive X

n

are slightly negatively correlated (consistent with intuition).

n

, and the covariance cov(Z

n

, Z

n+1

).

E[Z

n

] = n

2

(1/n

2

) = 1 and E[Z

2

n

] = n

4

(1/n

2

) = n

2

,

4

so that

V ar(Z

n

) = E[Z

2

n

] (E[Z

n

])

2

= n

2

1.

Given Z

n+1

= 1, we know that Y

(n+1)

2 is the largest of the rst (n + 1)

2

values of Y

j

.

However, the remaining ((n + 1)

2

1)! permutations of the remaining integers are equally

likely. Hence,

P(Z

n

= 1|Z

n+1

= 1) = P(Z

n

= 1),

so that Z

n

and Z

n+1

are independent. Finally, independence implies that the variables are

uncorrelated. Hence, cov(Z

n

, Z

n+1

) = 0.

X

n

= (X

1

+ + X

n

)/n. Prove or disprove:

X

n

converges

w.p.1 (with probability one) to a nite limit c. If the limit exists, then identify the constant c.

This is a minor variant of Problem 1.37 in the rst homework. We exploit the fact that

the sequence of random variables {X

4k

: k 1} X

4

, X

8

, X

12

, . . . are i.i.d. with P(X

4k

=

1) = 1/4! = 1/24 = 1 P(X

4k

= 0). Similarly, the sequences {X

4k+1

; k 1} X

5

, X

9

, . . .,

{X

4k+2

: k 1} X

6

, X

10

, X

14

, . . . and {X

4k+3

: k 1} X

7

, X

11

, X

15

, . . . are each i.i.d.

with the same distribution. Hence, the strong law of large numbers (SLLN) applies to each

of these subsequences separately. That in turn implies that the SLLN holds for the entire

sequence, with c = 1/4. More generally, this example is a special case of m-dependence, a

form of weak dependence.

(d) (6 points) In the setting of part (c), Prove or disprove: There exists a nite constant c

such that E(

X

n

c)

2

0 as n . If the limit exists, then identify the constant c.

n

]. In this case,

E(

X

n

c)

2

= V ar(

X

n

) =

1

n

2

_

_

n

j=1

n

k=1

Cov(X

j

, X

k

)

_

_

=

1

n

2

_

_

O(1) +

n

j=1

(V ar(X

j

) + 6Cov(X

j

, X

j+1

))

_

_

=

1

n

2

_

n

_

3

16

_

+ 6n

_

1

80

_

+O(1)

_

0 as n ,

where O(1) is the negligible error caused by the end eects.

Z

n

= (Z

1

+ +Z

n

)/n. Prove or disprove:

Z

n

converge w.p.1

to a nite limit c. If the limit exists, then identify the constant c.

5

Here we apply the Borel-Cantelli lemma to show that P(Z

n

= 0 i.o.) = 0. That follows

because

n=1

P(Z

n

= 0) =

n=1

P(Z

n

= n

2

) =

n=1

(1/n

2

) < .

Whenever, the events {Z

n

= 0} occur only nitely often,

Z

n

0. Hence, we have

Z

n

0

w.p.1.

(f) (6 points) In the setting of part (e), Prove or disprove: There exists a nite constant c

such that E(

Z

n

c)

2

0 as n . If the limit exists, then identify the constant c.

There does not exist a constant c such that there is convergence in the mean-squared (in

L

2

). Note that

E(

Z

n

c)

2

= V ar(

Z

n

) + (c E[Z

n

])

2

,

so that suces to consider c = E[

Z

n

] = 1 and it suces to focus on V ar(

Z

n

). However,

V ar(

Z

n

) =

1

n

2

n

k=1

V ar(Z

k

) =

1

n

2

n

k=1

(k

2

1)

=

1

n

2

_

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

6

n)

_

as n ,

being of order O(n). Indeed, V ar(

Z

n

)/n 1/3 as n by the reasoning above.

Columbia University has decided to start the Columbia Space Company, which will launch

satellites from its planned Manhattanville launch site beginning in 2013, referred to henceforth

as time 0. Allowing for steady growth, the Columbia Space Company plans to launch satellites

at an increasing rate, beginning at time t = 0. Specically, they anticipate that they will

launch satellites according to a nonhomogeneous Poisson process with rate (t) = 2t satellites

per year for t 0. Suppose that the successive times satellites stay up in space are independent

random variables, each exponentially distributed with mean 2 years.

(a) What is the probability (according to this model) that no satellites will actually be

launched during the rst three years (between times t = 0 and t = 3)?

Let N(t) count the number of satellite launches in the interval [0, t]. The stochastic process

N {N(t) : t 0} is directly a nonhomogeneous Poisson process, as in Section 2.4.

P(N(3) = 0) =

e

m(3)

m(3)

0

0!

= e

m(3)

,

where

m(t)

_

t

0

(u) du =

_

t

0

2udu = t

2

. (4)

Hence, m(3) = 3

2

= 9 and the answer is e

9

.

6

(b) What is the probability that precisely 7 satellites will be launched during the second

year (between times t = 1 and t = 2)?

P(N(2) N(1) = 7) =

e

m(1,2)

m(1, 2)

7

7!

,

where m(s, t) m(t) m(s) for

m(t)

_

t

0

(u) du =

_

t

0

2udu = t

2

. (5)

Hence, m(1, 2) = 2

2

1

2

= 3. The nal answer is thus

P(N(2) N(1) = 7) =

e

3

3

7

7!

.

(b) Let S(t) be the number of satellites in space at time t. Give an expression for the

probability distribution of S(6)?

t

/GI/model, as in the

physics paper or Chapter 2 of Ross. We know that S(t) has a Poisson distribution for each

t, where the mean function is

m(t) =

_

t

0

(u)G

c

(t u) du =

_

t

0

2ue

(1/2)(tu)

du, t 0.

Hence,

P(S(6) = k) =

e

m(6)

m(6)

k

k!

,

where

m(6) =

_

6

0

2ue

(1/2)(6u)

du. (6)

(c) Let R(t) be the number of satellites that have been launched and have returned to earth

in [0, t]. Give an expression for the joint probability P(S(6) = 7, R(6) = 8).

From Theorem 1 of the physics paper (and the Poisson random measure representation

there), we know that S(6) and R(6) are independent random variables with means E[S(6)] =

m(6) given in (6) above and

E[R(t)] =

_

t

0

(u)G(t u) du for t = 6.

However, we know that S(6) + R(6) = N(6), the total number of satellites launched in [0, 6].

Since E[N(6)] = 6

2

= 36, by the reasoning in parts (a) and (b), we can write E[R(t)] =

36 E[S(t)]. Finally, we have

P(S(6) = 7, R(6) = 8) =

_

e

E[S(6)]

E[S(6)]

7

7!

__

e

E[R(6)]

E[R(6)]

8

8!

_

,

7

using the formulas for the means already given.

This is explained by Theorem 2 and Figure 3 in the physics paper. From the Poisson

measure representation, this covariance coincides with the variance of the number of points in

a region bounded by two vertical lines and one 45 degree line, which in turn coincides with the

mean number in that region. As a consequence,

Cov(S(6), S(8)) =

_

6

0

(u)G

c

(8 u) du =

_

6

0

2ue

(1/2)(8u)

du.

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