# Exponential Distribution

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1 Exponential Distribution Definition: Exponential distribution with parameter λ: { λe λx x 0 f(x) = 0 x < 0 The cdf: F(x) = x Mean E(X) = 1/λ. f(x)dx = Moment generating function: φ(t) = E[e tx ] = { 1 e λx x 0 0 x < 0 λ λ t, E(X 2 ) = d2 dt 2 φ(t) t=0 = 2/λ 2. V ar(x) = E(X 2 ) (E(X)) 2 = 1/λ 2. t < λ 1

2 Properties 1. Memoryless: P(X > s + t X > t) = P(X > s). = = P(X > s + t X > t) P(X > s + t,x > t) P(X > t) P(X > s + t) P(X > t) = e λ(s+t) e λt = e λs = P(X > s) Example: Suppose that the amount of time one spends in a bank is exponentially distributed with mean 10 minutes, λ = 1/10. What is the probability that a customer will spend more than 15 minutes in the bank? What is the probability that a customer will spend more than 15 minutes in the bank given that he is still in the bank after 10 minutes? Solution: P(X > 15) = e 15λ = e 3/2 = 0.22 P(X > 15 X > 10) = P(X > 5) = e 1/2 =

3 Failure rate (hazard rate) function r(t) r(t) = f(t) 1 F(t) P(X (t,t + dt) X > t) = r(t)dt. For exponential distribution: r(t) = λ, t > 0. Failure rate function uniquely determines F(t): F(t) = 1 e t 0 r(t)dt. 3

4 2. If X i, i = 1, 2,...,n, are iid exponential RVs with mean 1/λ, the pdf of n i=1 X i is: λt (λt)n 1 f X1 +X 2 + +X n (t) = λe (n 1)!, gamma distribution with parameters n and λ. 3. If X 1 and X 2 are independent exponential RVs with mean 1/λ 1, 1/λ 2, P(X 1 < X 2 ) = λ 1 λ 1 + λ If X i, i = 1, 2,...,n, are independent exponential RVs with rate µ i. Let Z = min(x 1,...,X n ) and Y = max(x 1,...,X n ). Find distribution of Z and Y. Z is an exponential RV with rate n i=1 µ i. P(Z > x) = P(min(X 1,...,X n ) > x) = P(X 1 > x,x 2 > x,...,x n > x) = P(X 1 > x)p(x 2 > x) P(X n > x) n = e µ ix = e ( n i=1 µ i )x i=1 F Y (x) = P(Y < x) = n i=1 (1 e µ ix ). 4

5 Poisson Process Counting process: Stochastic process {N(t), t 0} is a counting process if N(t) represents the total number of events that have occurred up to time t. N(t) 0 and are of integer values. N(t) is nondecreasing in t. Independent increments: the numbers of events occurred in disjoint time intervals are independent. Stationary increments: the distribution of the number of events occurred in a time interval only depends on the length of the interval and does not depend on the position. 5

6 A counting process {N(t),t 0} is a Poisson process with rate λ, λ > 0 if 1. N(0) = The process has independent increments. 3. The process has staionary increments and N(t+s) N(s) follows a Poisson distribution with parameter λt: P(N(t+s) N(s) = n) = e λt(λt)n n! Note: E[N(t + s) N(s)] = λt. E[N(t)] = E[N(t + 0) N(0)] = λt., n = 0, 1,... 6

7 Interarrival and Waiting Time Define T n as the elapsed time between (n 1)st and the nth event. {T n,n = 1, 2,...} is a sequence of interarrival times. Proposition 5.1: T n, n = 1, 2,... are independent identically distributed exponential random variables with mean 1/λ. Define S n as the waiting time for the nth event, i.e., the arrival time of the nth event. n S n = T i. Distribution of S n : i=1 λt (λt)n 1 f Sn (t) = λe (n 1)!, gamma distribution with parameters n and λ. E(S n ) = n i=1 E(T i) = n/λ. 7

8 Example: Suppose that people immigrate into a territory at a Poisson rate λ = 1 per day. (a) What is the expected time until the tenth immigrant arrives? (b) What is the probability that the elapsed time between the tenth and the eleventh arrival exceeds 2 days? Solution: Time until the 10th immigrant arrives is S 10. E(S 10 ) = 10/λ = 10. P(T 11 > 2) = e 2λ =

9 Further Properties Consider a Poisson process {N(t), t 0} with rate λ. Each event belongs to two types, I and II. The type of an event is independent of everything else. The probability of being in type I is p. Examples: female vs. male customers, good s vs. spams. Let N 1 (t) be the number of type I events up to time t. Let N 2 (t) be the number of type II events up to time t. N(t) = N 1 (t) + N 2 (t). 9

10 Proposition 5.2: {N 1 (t),t 0} and {N 2 (t),t 0} are both Poisson processes having respective rates λp and λ(1 p). Furthermore, the two processes are independent. Example: If immigrants to area A arrive at a Poisson rate of 10 per week, and if each immigrant is of English descent with probability 1/12, then what is the probability that no people of English descent will immigrate to area A during the month of February? Solution: The number of English descent immigrants arrived up to time t is N 1 (t), which is a Poisson process with mean λ/12 = 10/12. P(N 1 (4) = 0) = e (λ/12) 4 = e 10/3. 10

11 Conversely: Suppose {N 1 (t), t 0} and {N 2 (t),t 0} are independent Poisson processes having respective rates λ 1 and λ 2. Then N(t) = N 1 (t) + N 2 (t) is a Poisson process with rate λ = λ 1 + λ 2. For any event occurred with unknown type, independent of everything else, the probability of being type I is p = λ 1 λ 1 +λ 2 and type II is 1 p. Example: On a road, cars pass according to a Poisson process with rate 5 per minute. Trucks pass according to a Poisson process with rate 1 per minute. The two processes are indepdendent. If in 3 minutes, 10 veicles passed by. What is the probability that 2 of them are trucks? Solution: Each veicle is independently a car with probability = 5 6 and a truck with probability 1 6. The probability that 2 out of 10 veicles are trucks is given by the binomial distribution: ( )( ) 2 ( )

12 Conditional Distribution of Arrival Times Consider a Poisson process {N(t), t 0} with rate λ. Up to t, there is exactly one event occurred. What is the conditional distribution of T 1? Under the condition, T 1 uniformly distributes on [0,t]. Proof P(T 1 < s N(t) = 1) = P(T 1 < s, N(t) = 1) P(N(t) = 1) P(N(s) = 1,N(t) N(s) = 0) = P(N(t) = 1) P(N(s) = 1)P(N(t) N(s) = 0) = P(N(t) = 1) = (λse λs ) e λ(t s) λte λt = s Note: cdf of a uniform t 12

13 If N(t) = n, what is the joint conditional distribution of the arrival times S 1, S 2,..., S n? S 1, S 2,..., S n is the ordered statistics of n independent random variables uniformly distributed on [0,t]. Let Y 1, Y 2,..., Y n be n RVs. Y (1), Y (2),..., Y (n) is the ordered statistics of Y 1, Y 2,..., Y n if Y (k) is the kth smallest value among them. If Y i, i = 1,...,n are iid continuous RVs with pdf f, then the joint density of the ordered statistics Y (1), Y (2),..., Y (n) is f Y(1),Y (2),...,Y (n) (y 1, y 2,...,y n ) = { n! n i=1 f(y i) y 1 < y 2 < < y n 0 otherwise 13

14 We can show that Proof f(s 1, s 2,...,s n N(t) = n) = n! t n 0 < s 1 < s 2 < s n < t f(s 1, s 2,...,s n N(t) = n) = f(s 1, s 2,...,s n,n) P(N(t) = n)) = λe λs 1λe λ(s 2 s 1) λe λ(s n s n 1 ) e λ(t s n) e λt (λt) n /n! = n! t, 0 < s n 1 < < s n < t For n independent uniformly distributed RVs on [0, t], Y 1,..., Y n : f(y 1, y 2,...,y n ) = 1 t n. Proposition 5.4: Given S n = t, the arrival times S 1, S 2,..., S n 1 has the distribution of the ordered statistics of a set n 1 independent uniform (0, t) random variables. 14

15 Generalization of Poisson Process Nonhomogeneous Poisson process: The counting process {N(t), t 0} is said to be a nonhomogeneous Poisson process with intensity function λ(t), t 0 if 1. N(0) = The process has independent increments. 3. The distribution of N(t+s) N(t) is Poisson with mean given by m(t + s) m(t), where m(t) = t 0 λ(τ)dτ. We call m(t) mean value function. Poisson process is a special case where λ(t) = λ, a constant. 15

16 Compound Poisson process: A stochastic process {X(t),t 0} is said to be a compound Poisson process if it can be represented as X(t) = N(t) i=1 Y i, t 0 where {N(t),t 0} is a Poisson process and {Y i,i 0} is a family of independent and identically distributed random variables which are also independent of {N(t),t 0}. The random variable X(t) is said to be a compound Poisson random variable. Example: Suppose customers leave a supermarket in accordance with a Poisson process. If Y i, the amount spent by the ith customer, i = 1, 2,..., are independent and identically distributed, then X(t) = N(t) i=1 Y i, the total amount of money spent by customers by time t is a compound Poisson process. 16

17 Find E[X(t)] and V ar[x(t)]. E[X(t)] = λte(y 1 ). V ar[x(t)] = λt(v ar(y 1 ) + E 2 (Y 1 )) Proof N(t) E(X(t) N(t) = n) = E( = E( = E( i=1 Y i N(t) = n) n Y i N(t) = n) i=1 n Y i ) = ne(y 1 ) i=1 E(X(t)) = E N(t) E(X(t) N(t)) = P(N(t) = n)e(x(t) N(t) = n) = n=1 P(N(t) = n)ne(y 1 ) n=1 = E(Y 1 ) np(n(t) = n) n=1 = E(Y 1 )E(N(t)) = λte(y 1 ) 17

18 N(t) V ar(x(t) N(t) = n) = V ar( = V ar( = V ar( i=1 Y i N(t) = n) n Y i N(t) = n) i=1 n Y i ) i=1 = nv ar(y 1 ) V ar(x(t) N(t) = n) = E(X 2 (t) N(t) = n) (E(X(t) N(t) = n)) 2 E(X 2 (t) N(t) = n) = V ar(x(t) N(t) = n) + (E(X(t) N(t) = n)) 2 = nv ar(y 1 ) + n 2 E 2 (Y 1 ) 18

19 V ar(x(t)) = E(X 2 (t)) (E(X(t))) 2 = P(N(t) = n)e(x 2 (t) N(t) = n) (E(X(t))) 2 = n=1 P(N(t) = n)(nv ar(y 1 ) + n 2 E 2 (Y 1 )) (λte(y 1 )) 2 n=1 = V ar(y 1 )E(N(t)) + E 2 (Y 1 )E(N 2 (t)) (λte(y 1 )) 2 = λtv ar(y 1 ) + λte 2 (Y 1 ) = λt(v ar(y 1 ) + E 2 (Y 1 )) = λte(y 2 1 ) 19

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