MSF 577: HOMEWORK 1 Name: _____________________

NEATNESS COUNTS!!!
1.) Let X ∼ Poisson( λ1 ) and Y ∼ Poisson( λ2 ) and assume that X and Y are
independent. Demonstrate that X + Y ∼ Poisson( λ1 + λ2 ).

2.) You are given that the random variable X is distributed as an exponential
distribution with parameter β = 3. Calculate:
a. P( X < 5 )
b. P( 3 < X < 5 )
c. P( 5 < X )

3.) If the number of trades per minute N is Poisson distributed with λ = 3,

calculate:
a. P( N = 0 )
b. P( N = 1 )
c. P( N = 2 )

4.) Given the following empirical data, what is the value of X given the random
probability is .34?

i xi nx
1 300 249
2 400 111
3 500 59
4 600 357
5.) Consider a simple queuing problem. If the average inter-arrival time of
units into a FIFO queue is 6 seconds and the average service time is 5
seconds,
a. What is the probability that there are more than 3 units in the
system?
b. What is the average time a unit spends waiting in the system?
c. What happens if the arrival rate is greater than the service rate?

6.) Translate the following FIX message.

8=FIX.4.1|35=8|55=ES|54=1|38=1|40=1|39=0|10=232|

7.) Here is an OUCH message. Is this a buy or a sell order? What is the
quantity?

0x 4F 31 30 30 31 20 4A 75 6C 20 32 31 20 31 34 53 00 00 00 64 4D
53 46 65 20 20 20 20 00 06 E2 80 00 01 86 9E 41 41 41 41 4F 41 59
00 00 02 EE 52 52