Professional Documents
Culture Documents
Variables
Kaustav Banerjee
IIM Lucknow
July 2021
0.10
0.05
0.00
0 5 10 15 20
defectives
20
X
P(X = x), x = 0(1)20; P(X = x) = 1
x=0
K Banerjee (IIML) Random Variables July 2021 4 / 18
Continuous random variable
0 10 20 30 40
waiting time
Z Z
P(X ∈ A) = f(x)dx; f(x) ≥ 0, ∀x ∈ Ω and f(x) dx = 1
A Ω
P
x≤a P(X = x), if X is discrete variable;
F(a) = P(X ≤ a) = R
x≤a
f(x) dx, if X is continuous variable.
0.8
0.6
0.4
0.2
0.0
0 5 10 15 20
defectives
0.6
0.4
0.2
0.0
0 10 20 30 40
waiting time
Consider a simple bet on the red of a roulette wheel that has 18 red,
18 black, and 2 green slots. This bet is at even money: a $10 wager
on red has an expected profit
18 20
E(Profit) = 10 × + (−10) × = −0.526
38 38
The negative expected profit says we expect to lose an average of
52.6g on every $10 bet. Over a long series of bets, the relative
frequency of winning will approach the probability 18/38 and that of
losing will approach 20/38, so a player will lose a substantial amount
of money. Other bets against the house have a similar negative
expected profit. How else could a casino stay in business?
SD(X) σ
CV(X) = =
E(X) µ
p 1−p
−4 −2 x 0 2 4
−2 −1 0 1 2