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Probability & Cumulative

Distribution Functions

Presentation by:
YATIN VASAVA(150073110025)
1
Probability Distribution of
Continuous Random
Variables
For continuous random variable, we
use the following two concepts to
describe the probability distribution

1. Probability Density Function


2. Cumulative Distribution Function
Probability Density Function
Probability Density Function is a similar concept
as the probability distribution function for a
discrete random variable.
You can consider the probability density function
as a smoothed probability distribution function.
Comparing Probability Distribution
Function (for discrete r.v) and
Probability density function (for
continuous r.v)
Comparing Probability Distribution
Function (Discrete r.v) and
Probability density function

Probability distribution function for a discrete random


variable shows the probability for each outcome.
Comparing Probability Distribution
Function (Discrete r.v) and Probability
density function (Continuous r.v)

f(x)

a b x

Probability Density Function shows the probability


that the random variable falls in a particular range.
Probability density function
Let X be a continuous random variable. Let x
denotes the value that the random variable X
takes. We use f(x) to denote the probability
density function.
Example
You client told you that he will visit you between
noon and 2pm. Between noon and 2pm, the time
he will arrive at your company is totally random.
Let X be the random variable for the time he
arrives (X=1.5 means he visit your office at
1:30pm)
Let x be the possible value for the random
variable X. Then, the probability density function
f(x) has the following shape.
Probability Density Function
Example

f(x)

0.5

0 2 x
Probability Density Function
Example
The probability that your client
f(x) visits your office between 12:30
and 1:00 is given by the shaded
area.

0.5

0 0.5 1
2 x
Probability Density Function
Example
Note that area between 0 and 2 should be
equal to 1 since the probability that your
f(x)
clients arrives between noon and 2pm is 1
(assuming that he will keep his promise that
he will visit between noon and 2pm)

0.5

0 2 x
Some Properties of probability
density function

1. f(x)0 for any x


2. Total area under f(x) is 1
Cumulative Distribution
Function

The cumulative distribution function,


function F(x),
for a continuous random variable X
expresses the probability that X does not
exceed the value of x, as a function of x
F ( x) P( X x)
In other words, the cumulative
distribution function F(x) is given by
the shaded area.

f(x)

F(x)=P(Xx)

x x
Cumulative Distribution Function
-Example-

f(x) F(x)
Cumulative
Density Distribution
Function Function

0.5

0 x 2 0 2
A property of cumulative
distribution functions

P ( a X b) P ( X b) P ( X a )

F (b) F (a )
Probability Density Function and Cumulative
Distribution Function
-Exercise-
The daily revenue of a certain shop is a continuous
random variable. Let X be the random variable for
the daily revenue (in thousand dollars). Suppose
that X has the following probability density
function.

f ( x) 0.25 for 0 x 4
0 otherwise

Ex.1 Graph f(x), Ex. 2 Find F(3),


Ex.3 Find P(2<X<3) Ex. 4 Graph F(x)
Relationship Between Probability Density
Function and Cumulative Distribution
Function
Let X be a continuous random variable.
Then, there is a following relationship
between probability density function and
cumulative distribution function.

P (a X b) F (b) F (a )
b
f (u )du
a
Expectation for continuous
random variable
Expectation for a continuous random variable is
defined in a similar way as the expectation for a
discrete random variable.

See Next Page


Expectation for the discrete random
variable is defined as
Discrete case : E ( X ) xP( x)
x
For continuous variable, f(x) corresponds to
P(x). However, we cannot sum xf(x) since the
value of x is continuous. Therefore, we define the
expectation using integral in the following way.
x
Continuous Case : E(X) xf ( x)dx
x
where x is the lowest possible value of X and x
is the highest possible value for X. We use X to
denote E(X) .
Expectation of a function of a
continuous random variable
Let g(X) be a function of a continuous random
variable X. Then the expectation of g(X) is given
by the following.

x
E[g(X)] g ( x) f ( x)dx
x

A special case is the variance given in the next slide


Variance and standard deviation
for the continuous random
variable
Variance and standard deviation for a continuous
random variable are defined as

x
Var ( X ) ( x X ) f ( x)d x
2
X
2
x

SD( X ) X Var ( X )
Expected value
for Continuous Random variable
-Exercise-
Continue using the daily revenue example.
The probability density function for X is
given by
f ( x) 0.25 for 0 x 4
0 otherwise

Compute E(X) and SD(X)


Linear Functions of Variables
Let X be a continuous random variable with mean X
and variance X2, and let a and b any constant fixed
numbers. Define the random variable W as
W a bX
Then the mean and variance of W are
W E (a bX ) a b X
and
Var (a bX ) b
2
W
2 2
X

and the standard deviation of W is


W b X
Linear Functions of Variables
-Exercise-
Continue using the daily sales example.

Suppose that the managers daily salary


in thousand dollars is determined in the
following way.

W=4+0.5X

Ex: Compute E(W) and SD(W)


Linear Functions of Variable

An important special case of the previous


results is the standardized random variable

X X
Z
X
which has a mean 0 and variance 1.
Normal Distribution
A random variable X is said to be a normal
random variable with mean and variance 2 if X
has the following probability density function.

1 ( x ) 2 / 2 2
f ( x) e for - x
2 2

where e and are physical constants, e =


2.71828. . . and = 3.14159. . .
Probability Density Function for
a Normal Distribution

0.4

0.3

0.2

0.1

0.0
x
A note about the normal
distribution
Normal distributions approximate many
types of distributions.
Normal distributions have been applied to
many areas of studies, such as economics,
finance, operations management etc.
Normal Distribution
approximates many types of
distributions.
The shape of the normal
distribution
The shape of the normal density
function changes with the mean and the
standard deviation
The shape of normal

distribution. Exercise
Open Normal Density Function Exercise.

Excel function NORMDIST(x, ,,FALSE) will


compute the normal density function with mean
and standard deviation evaluated at x.
EX1: Plot the normal density functions for =0 and
=1, and =1 and =1. You will see how the
change in the mean affect the shape of the density
(without changing standard deviation)
EX2: Plot the normal density function for =0 and
=1, and =0 and =2. You will see how the
change in the standard deviation affects the shape
(without changing the mean)
Answer

1. Changing the mean without changing the standard


deviation causes a shift.
2. Increasing standard deviation makes the shape flatter
(Fat Tail).
Properties of the Normal
Distribution
Suppose that the random variable X follows a
normal distribution given by the previous
slides. Then
i. The mean of the X ) variable is ,
E (random

E[( X )
ii. The variance of the random
X
2
] 2
variable is 2,

iii. The Following notation means that a


random variable has the normal
X~
distribution with N ( , and
mean
2
) variance 2.
Cumulative Distribution
Function of the Normal
Distribution

Suppose that X is a normal random variable


with mean and variance 2 ; that is X~N(,
2). Then the cumulative distribution function
is
F ( x0 ) P( X x0 )

This is the area under the normal probability


density function to the left of x0, as illustrated
in the figure in the next slide.
Shaded Area is the Probability that X
does not Exceed x0 for a Normal
Random Variable

f(x)

x0 x
Range Probabilities for Normal
Random Variables

Let X be a normal random variable with


cumulative distribution function F(x), and let a
and b be two possible values of X, with a < b.
Then
P (a X b) F (b) F (a )

The probability is the area under the


corresponding probability density function
between a and b.
Range Probabilities for Normal Random
Variables

f(x)

a b x
TH A N K
YOU