332:541

Sto hasti Signals and Systems

Fall 2000

Quiz I and Solutions

You have 1.5 hours to answer the following three questions. You are allowed both sides of an 11x8.5 in h
pie e of paper for notes. GOOD LUCK!

1. (50 points)
Derived Random Variables: Let X and Y be two independent uniformly distributed
random variables on the interval [0; 1. Let Z = X 2 + Y 2 . Please nd the CDF and then e
the probability density for the random variable Z . Sket h the density fun tion.
CDF for A = X 2 is obtained from
Z pa
dx
FA (a) =
0

whi h implies

1
2

fA(a) = a

1 2

on (0; 1) and zero elsewhere. Sin e X and Y are independent the density on Z is the onvolution of the densities for X 2 and Y 2 (whi h we just derived). There are two intervals to
onsider. On 0  z  1 we have
Z

fZ (z ) =

1
4

(z

a)

fZ (z ) =

1 1
(z
4 z 1

a)

= (a) 1=2 da =

1 2

and on 1  z  2 we have
Z

= (a)

1 2

1 2

da =

and that is as far as you an go using this approa h unless you have an ex ellent ommand of
integral al ulus (whi h I don't), an integral book or a symboli math program. If you went this
way and formulated it this far, you got almost full redit. If you went on to get it ompletely
orre t you got full redit and a smile from me for being a al ulus wizard.
R
, the integral of p 1 dx is
In any ase, a ording to MAPLE
x( x)

x =2
)
x x2

ar tan( p

so that

fZ (z ) = =4
on [0; 1 (whi h is EXTREMELY ounterintuitive until you look at the next solution). For
[1; 2 we have
"

1 z=2
1
)
fZ (z ) = ar tan( p
4
z 1

ar tan( p

(z

(z

1) z=2
)
1)z (z 1)2

Another approa h is to look at the JOINT probability spa e (whi h is a little square in the
(x; y)) plane and al ulating the CFD of Z dire tly by integrating the appropriate region in
the (x; y) plane.
1

For 0  z  1 the region is a 1/4-pie (like the ir ular pie you eat) sli e of radius z . For a
sli e whi h subtends angle  radians with radius r, the area is 2 r2 This yields


Prob(Z  z ) = z
4

whi h gives the PDF as =4 on (0; 1).

For 1  z  2 the pie sli e ex eeds thepboundaries of the box.pSo you add up the areas of the
two triangles (sides
p 1 and hypotenuse z for a total area of pz 1) and then the joining pie
sliver of radius p z whi h subtends an angle (2)(=4 ar tan z 1) and therefore has area
z (=4 ar tan z 1). The CDF is then

Prob(Z  z ) = z

1 + z (=4

Dierentiating in z gives

ar tan z

1)

fZ (z ) = =4 ar tan( z 1)
whi h (unbelievably enough) is the same result as the rst method.
Note that even if you did not know the derivative of ar tan, this approa h allowed you to
sket h the PDF sin e you SHOULD know how ar tan() behaves more or less even if you don't
know the integral.

2. (50 points) A Blast From the Re ent Past: Suppose an experiment is performed N times
independently and that the probability of event A o uring is p. We then know that if k is
the number of times event A o urs in N trials that by the (strong) law of large numbers we
have
k
=p
lim
N !1 N
(a) (25 points) Let X be a dis rete random variable whi h an take
on a nite number of
P
dierent values am , m = 1; 2; :::; M ea h with probability pm , m pm = 1. Suppose we
have N independently observed values of X , x1 ; x2 ; :::xN . Use the above law to show
that
N
1 X
lim
xi = E (X )
N !1 N i=1

Let km be the number of times event m o urred in the N trials. Then limN !1 km =N =
pm . Thus we an form
M
N
M
X
X
k
1 X
am m =
lim
xi = lim
a p = E (X )
N !1 N i=1
N !1 m=1
N m=1 m m

(b) (25 points) If possible, repeat part (a) for a ontinuous random variable, but one whi h
is limited to taking on values on a nite interval, say (0,1).
Let the ontinuous random variable be X with probability density fX (x). Form bins of
size 1=M and essentially quantize the sample values xi to values am = m=M , m =
1; 2;


; M . Call the derived (dis rete) random variable X~i . We then dene N = QM
for an integer Q and the dieren e Vi = Xi X~i . We then have

pm = Prob((m

1)=M  X~ i  m=M ) =

m=M

=M

1)

fX (x)dx

and from the rst part we know that

X
1 QM

lim

x~i =

Q!1 QM i=1

m=1

am pm = E (X~ )

We then write
X
1 QM

X
1 QM

lim
x~ = lim
(X
Q!1 QM i=1 i Q!1 QM i=1 i

and note
p that we must have jVij
Q = M we have







lim

Vi ) = lim

X
1 QM

Q!1 QM i=1

 1=M .
3=2
MX

M !1 M 3=2 i=1

Vi

Xi

X
1 QM

lim
V
Q!1 QM i=1 i

This means that if we artfully onstru t








 Mlim
1=M = 0
!1

Likewise we note that from the denition of pm and am we have

M

am pm = E [X
lim
M !1 m=1
and we're done.
3. (50 points)
Rutgera and Wall Street: Rutgera Universa, the world famous Rutgers University Graduate student has a part time job on Wall Street with an investment bank. Rutgera's job is
to nd promising investment strategies and make money for her bosses.
Rutgera is approa hed one day with the followed s heme.





Rutgera provides apital (money) C

At the end of the day Rutgera's portfolio will have value P = C where Prob( = 2) =
1=2, Prob( = 1=2) = 1=4 and Prob( = 1=4) = 1=4.
The same rules apply on any given day and she an reinvest whatever the total was at
the end of the previous day (i.e., C (n) = P (n 1)). Ea h day's events are independent
of all ohers

You must help Rutgera de ide whether this is a good or bad investment s heme.
(a) (10 points) Assuming Rutgera puts C (1) = Q dollars in at the beginning of day 1,
arefully sket h the probability mass fun tion for P (1) and al ulate its expe ted value.
Cal ulate its varian e.
Prob(P (1) = 2Q) = 1=2, Prob(P (1) = Q=2) = 1=4 and Prob(P (1) = Q=4) = 1=4.
The expe ted value is Q(2(1=2) + (1=2)(1=4) + (1=4)(1=4)) = (19=16)Q. The varian e is
Q2 [(13=16)2 (1=2) + (11=16)2 (1=4) + (15=16)2 (1=4) = 684Q2 =1024 = 0:668Q2
(b) (10 points) Ea h day Rutgera reinvests the whole portfolio C (n) = P (n 1). Let n
be the s ale fa tor for day n. Find an expression for P (n) in terms of C (1) and the i .
What is the expe ted value and varian e of P (n) assuming C (1) = Q.
Q
P (n) = Qn ni=1 i . Sin e the i are independent E (P (n)) = Q[E ()n = Q(19=16)n .

The varian e is

Q2n E [(

i=1

"

i (19=16)n )2 = Q2n

i=1

E [2i 2(19=16)2

i=1

E [i + (19=16)2n

whi h simplies to
h

P2 (n) = Q2n (133=64)n

(19=16)2n = Q2 (133=64)n

(19=16)2n

( ) (10 points) Dene L(n) = log P (n). Cal ulate the mean and varian e of L(n).
Q
P (n) = Qn ni=1 i . Sin e the i are independent E [log(P (n)) = log(Q) + nE log() =
n log(Q) n=4. The varian e is the sum of varian es of the individual i . Sin e they

are i.i.d we have

2
2
2
2
2
log(
P (n)) = n = n[(5=4) =2 + ( 3=4) =4 + ( 7=4) =4 = (108=64)n = (27=16)n

(d) (20 points) Is this a good or bad investment s heme? HINT: This is an appli ation of
the law of large numbers.

It looks like a good investment s heme at rst be ause the expe ted value of the portfolio
on day n is Qn  n where  = 19=16 > 1. That is, the expe ted value of the portfolio
goes to innity in n. However, the fa t that the varian es also go to innity is ause for
on ern.
So we note that the log portfolio is a sum of independent identi ally distributed random
variables. That means that the sample mean goes to the expe ted value WITH PROBABILITY 1!!!!! The expe ted value is -1/4 whi h means that log(P (n))=n ! 1=4.
Thus, all the money is lost with probability 1. Ergo, the investment s heme SUCKS!SUCKS!SUCKS!
Note: this problem was slightly dierent from previous versions on previous exams in
that you did not need the entral limit theorem (be ause you don't know that theorem
yet). If you used the CLT, you did not get redit.