Fall 2017 ACTSC 613 Zhu, M

University of Waterloo
ACTSC 613

Problem of the Week, #3

( Distributed: September 26, 2017; Due: October 3, 2017 )

1. Suppose that a pair of random variables, X and Y , have joint density function

x2 − (1.2)xy + y 2
 
1
f (x, y) = exp − , x, y ∈ R.
2π × (0.8) 2 × (0.8)2

(a) Perform the necessary integration, and show that the marginal distribution of X is
a normal distribution (see “Facts” below) with µ = 0 and σ = 1. [Notice that, by
symmetry, the marginal distribution of Y is the same as that of X.]
(b) Find the conditional distribution of Y given X, fY |X (y|x), and hence determine the
conditional expectation E(Y |X) and the conditional variance Var(Y |X).
(c) Numerically verify the law of total variance, Var(Y ) = E[Var(Y |X)] + Var[E(Y |X)].
(d) If X = 1.5, what is the best mean-squared error prediction of Y ?
(e) Compute E(XY ). [Later we will explain why this is relevant and not just another mean-
ingless exercise. There is also a relatively easy way to compute this based on what you’ve
already calculated in (1b) — hint: apply the law of total expectation.]

Facts: Perhaps the most widely used probability distribution is the normal distribution, whose
density function is the famous “bell curve”:

(x − µ)2
 
1
f (x) = √ exp − .
2πσ 2 2σ 2

If a random variable X ∈ R has the normal density function given above — often denoted by
“X ∼ N(µ, σ 2 )”, then

(x − µ)2
 
1
Z
E(X − µ) = (x − µ) · √ exp − dx = 0 ⇒ E(X) = µ
2πσ 2 2σ 2

and
(x − µ)2
 
1
Z
2 2
Var(X) = E[(X − µ) ] = (x − µ) · √ exp − dx = σ 2 .
2πσ 2 2σ 2
That is, the two parameters of the normal distribution, µ and σ 2 , are exactly the mean and
the variance of the distribution, respectively.

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