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Exponential Distribution

The exponential distribution is a continuous probability distribution used to model the time until an event occurs, with applications in various fields such as physics, engineering, and finance. It is characterized by its mean, standard deviation, and specific formulas for calculating probabilities related to the distribution. The document also includes examples and calculations to illustrate the use of the exponential distribution in real-world scenarios.

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57 views24 pages

Exponential Distribution

The exponential distribution is a continuous probability distribution used to model the time until an event occurs, with applications in various fields such as physics, engineering, and finance. It is characterized by its mean, standard deviation, and specific formulas for calculating probabilities related to the distribution. The document also includes examples and calculations to illustrate the use of the exponential distribution in real-world scenarios.

Uploaded by

sureshvishal6
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Exponential Distribution

• The exponential distribution is a continuous distribution that is


commonly used to measure the expected time for an event to
occur.
• For example, in physics it is often used to measure radioactive
decay, in engineering it is used to measure the time associated with
receiving a defective part on an assembly line, and in finance it is
often used to measure the likelihood of the next default for a
portfolio of financial assets. It can also be used to measure the
likelihood of incurring a specified number of defaults within a
specified time period.
Definition
• A continuous random variable x is said to follow
exponential distribution if its probability density
function

for x>0 and λ>0

e= 2.71828
• If events happen independently and randomly with a
constant rate over time, the waiting time between
successive events follows an exponential distribution.
• Here are some examples of random variables that
might follow an exponential distribution:
1.Time between customer arrivals at an auto repair shop.
2.The amount of time your copy machine works between
visits by the repair people.
3.The length of time of a typical telephone call.
4.The time until a TV system fails.
5.The time it takes to provide service for one customer.
Properties of Exponential Distribution
1. Mean of Exponential Distribution is
2. The standard deviation is always equal to the
mean: σ = μ.
3. Variance of Exponential Distribution is

4. Measure of skewness is 2
5. Measure of Kurtosis is 9 (Exponential curve is
leptokurtic as measure of kurtosis is>3)
6. Median of Exponential Distribution is= 1/λ
For an Exponential Distribution
The exact probability that an exponential
random variable X with mean μ is less
than a is given by the formula
For an Exponential Distribution
The exact probability that an exponential
random variable X with mean μ is greater
than a is given by the formula
For an Exponential Distribution
The exact probability that an exponential
random variable X with mean μ is more than a
but less than b is given by the formula
• The formula for exponential distribution is
derived by using the following steps:

Step 1: Firstly, try to figure out whether the event


under consideration is continuous and
independent in nature and occurs at a roughly
constant rate. Any practical event will ensure that
the variable is greater than or equal to zero.
• Step 2: Next, determine the value of the scale parameter,
which is invariably the reciprocal of the mean.
• λ = 1 / mean
• Step 3: Next, multiply the scale parameter λ and the
variable x and then calculate the exponential function of
the product multiplied by minus one i.e. e– λ*x.
Step 4: Finally, the probability density function is
calculated by multiplying the exponential function and
the scale parameter.
• If the above formula holds true for all x greater than or
equal to zero, then x is an exponential distribution.
Ex
• Let us take the example of exponential distribution i.e x
which is the amount of time taken (in minutes) by an office
peon to deliver from the manager’s desk to the clerk’s desk.
The function of time taken is assumed to have an
exponential distribution with the average amount of time
equal to five minutes.
• Given that x is a continuous random variable since time is
measured.
• Average, μ = 5 minutes
• Therefore, scale parameter, λ = 1 / μ = 1 / 5 = 0.20
• Hence, the exponential distribution probability function can be derived as,
f(x) = 0.20 e– 0.20*x
Now, calculate the exponential distribution probability function at different
values of x to derive the distribution curve.
For x = 0
exponential distribution probability function for x=0 will be,
Similarly, calculate exponential distribution probability function for x=1 to x=30
For x = 0, f(0) = 0.20 e -0.20*0 = 0.200
For x = 1, f(1) = 0.20 e -0.20*1 = 0.164
For x = 2, f(2) = 0.20 e -0.20*2 = 0.134
For x = 3, f(3) = 0.20 e -0.20*3 = 0.110
For x = 4, f(4) = 0.20 e -0.20*4 = 0.090
For x = 5, f(5) = 0.20 e -0.20*5 = 0.074
For x = 6, f(6) = 0.20 e -0.20*6 = 0.060
For x = 7, f(7) = 0.20 e -0.20*7 = 0.049
For x = 8, f(8) = 0.20 e -0.20*8 = 0.040
For x = 9, f(9) = 0.20 e -0.20*9 = 0.033
For x = 10, f(10) = 0.20 e -0.20*10 = 0.027
• For x = 11, f(11) = 0.20 e -0.20*11 = 0.022
For x = 12, f(12) = 0.20 e -0.20*12 = 0.018
For x = 13, f(13) = 0.20 e -0.20*13 = 0.015
For x = 14, f(14) = 0.20 e -0.20*14 = 0.012
For x = 15, f(15) = 0.20 e -0.20*15 = 0.010
For x = 16, f(16) = 0.20 e -0.20*16 = 0.008
For x = 17, f(17) = 0.20 e -0.20*17 = 0.007
For x = 18, f(18) = 0.20 e -0.20*18 = 0.005
For x = 19, f(19) = 0.20 e -0.20*19 = 0.004
For x = 20, f(20) = 0.20 e -0.20*20 = 0.004
• For x = 21, f(21) = 0.20 e -0.20*21 = 0.003
For x = 22, f(22) = 0.20 e -0.20*22 = 0.002
For x = 23, f(23) = 0.20 e -0.20*23 = 0.002
For x = 24, f(24) = 0.20 e -0.20*24 = 0.002
For x = 25, f(25) = 0.20 e -0.20*25 = 0.001
For x = 26, f(26) = 0.20 e -0.20*26 = 0.001
For x = 27, f(27) = 0.20 e -0.20*27 = 0.001
For x = 28, f(28) = 0.20 e -0.20*28 = 0.001
For x = 29, f(29) = 0.20 e -0.20*29 = 0.001
For x = 30, f(30) = 0.20 e -0.20*30 = 0.000
• We have derived distribution curve as follows
• Although the assumption of a constant rate is
very rarely satisfied in the real world scenarios, if
the time interval is selected in such a way that
the rate is roughly constant, then the exponential
distribution can be used as a good approximate
model. It has many other applications in the field
of physics, hydrology, etc.
Ex
• Suppose customers arrive independently at a
constant mean rate of 40 per hour. Find the
probability that at least one customer arrives in
the next 5 minutes.
Solution
• This is the probability that the exponential waiting time until
the next customer arrives is less than 5 minutes. Since 40
customers arrive each hour(60 minutes), on average, the
mean of this exponential random variable is μ (or
1/λ)= 60/40 = 1.5 minutes.
• =λ=1/1.5

• The probability is then:


P(X < 5) = 1 − e− 5/1.5 = 0.964.
• So the chances are high (96.4%) that at least one customer
will arrive in the next 5 minutes.
Ex
• Suppose customers arrive independently at a
constant mean rate of 40 per hour. Find the
probability that at least one customer arrives in
the next 3 minutes.
Ex
• Suppose customers arrive independently at a
constant mean rate of 40 per hour. Find the
probability that at least one customer arrives in
the next 1 minute.
Illn 1
• Find mean, SD, measure of skewness and
measure of kutosis of the exponential
distribution given by f(x)=
Illn 2( Ex 3)
For an exponential distribution whose
mean=2, find
(i) P(x<2)
(ii) P(x<1)
(iii) P(2<x<3)
(iv) P(X>2)

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