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# Section 7 Continuous

Distributions
Uniform
The probability of each
X in the interval is
uniform (the same)

Uniform can be discrete (ex: dice only have
integers) or continuous (all values in interval)

f (x) =
1
(b a)
: f or(a < x < b)
F(x) =
0 : x < a
x a
b a
: a s x s b
1: x > b

E[X] =
a + b
2
Var[X] =
(b a)
2
12
Uniform: Discrete vs. Continous

p(x) =
1
N

E[X] =
N +1
2
Var[X] =
N
2
1
12

f (x) =
1
(b a)
: f or(a < x < b)
F(x) =
0 : x < a
x a
b a
: a s x s b
1: x > b

E[X] =
a + b
2
Var[X] =
(b a)
2
12
Discrete Continuous
Normal Distribution
Notation: X ~ N(mean, variance)
Note: the second number is variance not standard
deviation
Ex: Standard Normal, Z ~ N(0, 1)
You will likely not need to know the pdf
You will be given a normal table to find common z
values
One-sided: use the (1 alpha) percentile
Two-sided: use the (1 alpha/2) percentile
P(r<X<s) = P[(r-)/ < (X-)/ < (s-)/ ]
Be comfortable using the table!!!

Normal Approximation of Other
Distribtutions
Given RV X, mean, and variance of the
distribution (without knowing what the real
distribution is)
Use normal distribution with the same
mean/variance to approximate the true
probability
Integer Correction for Discrete Distributions
P(n<=X<=m) becomes P(n-1/2<=X<=m+1/2)
Explained/justified well in Actex (see p. 200)
Youll likely still be closest to the right answer without
this, but its more accurate this way

When do I divide by sqrt(n)?
Estimating a value (X)
No square root of n

Estimating a mean (X bar) given a
sample size
Involves square root of n
(ex: SOA 123 #81)
Hint: you only use n when given a
sample size, and its used to
decrease the size of the interval b/c
an average is less variable

Note: the sample size does not
affect the mean, only the variance

X ~ N(
X
,o
X
2
)

o
mean
=
o
X
n
X ~ N(
x
,o
mean
2
)
X ~ N(
x
,
o
X
2
n
)
Exponential Distribution
Usage: X is time until
an event occurs
Parameter: Lamba
(mean = 1/Lambda)
Alternative: Use
Theta = 1/Lambda
Theta = Mean
Can rewrite pdf, E[X],
Var[X], etc. using
Theta

f (x) = e
x
f or: x > 0
F(x) =1e
x
f or: x > 0
E[X] =
1

Var[X] =
1

2
Memoryless Property

P[X > x + y | X > x]
=
P[X > x + y X > x]
P[X > x]
=
P[X > x + y]
P[X > x]
=
e
(x+y)
e
x
= e
y
= P[X > y]
Concept: what happened before
doesnt affect whats going to
happen now
an event occurs
Ex: if no insurance claims
have happened in the past
month, the exponential
doesnt think that one is
due now
There is just as much chance
of a claim happening this
week as there was in the
week following the first
claim
Distributions
These distributions are connected by the same
parameter: Lambda
X is the time between events (continuous)
time per events
X ~ Exponential, with mean (1/Lambda)
Ex: time between claims
N is the number of events that have occurred
while that time elapsed (discrete)
events per time
N ~ Poisson, with mean Lambda
Ex: number of claims in a period of time
Minimum of Multiple Exponential RVs
Given multiple RVs with exponential distributions and their means
(1/Lambda), find some probability involving the minimum of all of
the RVs (the lowest value of all of the RVs the time at which the
first event occurs)
An RV with a higher mean may still occur before the lower means (due
to randomness)
Trap: do not just add the means of the exponential distributions
Technique
Convert to Poisson distributions, each with mean Lambda
This new Lambda is the parameter for Y = min{Y1, Y2, , Yn}
Y ~ exponential with mean (1/Lambda)
Key Point: dont add the means of the exponentials, convert to
lambdas, add the lambdas, convert back to exponential
This is a harder problem, but VERY COMMONLY TESTED

Gamma Distribution
Actex does not recognize this as an important distribution to know
Uniform, Normal, and Exponential are the MOST important

f(x) =

*x
-1
*e
-x
()

(n) = (n-1)! (if n is a positive integer)

E(X) = /
Var(X) = /
2