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Fundamentals
1.1 Probability Theory
2.1 Theoretical Distributions
2.1.1 Discrete Distributions
The Binomial Distribution
The Poisson Distribution
Bernoulli Distribution
A Bernoulli experiment is one in which there are just two outcomes of
interests event A occurs or does not occur.
The indicator function of the event A is called a Bernoulli random variable:
1, if A occurs
X =
c
0, if A occurs
f (1) = P( A) = p, f (0) = P ( Ac ) = q = 1 p or
f ( x) = p x q1 x , for x = 0, 1
Sn = X1 + L + X n
n
n
n!
=
, = 1
k (n k )!k! 0
n
P( S n = k ) = P(k successes in n trials) = p k q n k
k
p k q n k : the probability of a particular pattern of k successes among n trials
n
: the number of distict patterns in which there are exactly k successes
k
The mean and variance are
ES n = EX 1 + L + EX 2 = np
Var ( S n ) = Var ( X 1 ) + L + Var ( X n ) = npq
=P
z = FN ( 0,1) ( z )
lim
n
npq
Example:
Consider a binomial distribution
with n=8 and p=1/2. The
binomial distribution is
k
8 1 1
P( X x) =
k x k 2 2
nk
x4
P ( X x) = F
Model: the number of years of lake freezing in 10 years is a binomial distributed random
variable
The model is appropriate, since one can assume
- Lake freezing is a Bernoulli experiment
- Whether it freezes in a given winter is independent of whether it froze in recent years
- The probability that the lake will freeze in a given winter is constant
f ( x) = P ( x events in time t ) =
- t
e ( m)
e ( t )
=
x!
x!
x
-m
EX = t , Var ( X ) = t
t=m= number of
events in t
m = 138 / 30 = 4.6
Prediction of the model:
e 4.6 4.60
= 0.01
f (0) = P0 (1) =
0!
e 4.6 4.610
+ L
P( x > 9) = f ( x) =
x >9
10!
Histogram of number of tornados reported annually in New York State for 19591988 (dashed), and fitted Poisson distribution with m=4.6 tornados per year (solid)
f N ( x) =
exp
2
2
2
1
FN ( x) =
2
(t ) 2
exp 2 2 dt
x
1
1
exp x 2
2
2
Normal Distribution
f N (x)
FN (x)
F ( z ) = P( Z z ) = 1 P( Z > z ) = 1 P( Z < z ) = 1 F ( z )
x
i =1
1 N
= ( xi ) 2
N i =1
xi : available data
2
( x / ) 1 exp( x / )
f ( x) =
,
( )
x, , > 0
( + 1) = ( ), (1) = 1
< 1 : f ( x) as x 0
= 1 : f (0) = 1 /
(exponential distribution)
> 1 : f (0) = 0
= 2 , =
with and 2 being estimates of the mean and variance
4D
1 N
with D = ln ln( xi ), xi are the available data
N i =1
(x ) (x )
exp exp
( x )
F ( x) = exp exp
Return Values
-The return values for preset periods (e.g. 10, 50, 100) years are thresholds that,
according to the model, will be exceeded on average once every return period
- Return values are the upper quantiles of the extreme value distribution
- Example: Suppose that the random variable Y represents an annual extreme
maximum and that Y has the probability density distribution fY(y). The 10-year return
value for Y is the value Y(10) such that
y(10 )
fY ( y )dy =
1
10
In general, the T-year return value for the annual maximum, Y(T) , is the solution of
y( T )
fY ( y )dy =
1
T
Model:
Annual maxima of daily temperature are random variables with a Gumble distribution
if x > 0
f X ( x) = (k / 2)2 k / 2
0
otherwise
A
B/k
=0
for k 2
k
for k 3
k 2
does not exist for k = 1, 2 does not exists for k = 1,2
2 =
( k +l ) / 2
for l > 2
for l > 4
r r T 1 r r
1
exp
(
x
) (x )
(2 | |)1/ 2
A bivariate normal
probability density
function with variances
12=22=1 and
covariances
12=21=0.5
Top: Contours of
constant density
Bottom threedimensional
representation
Non-parametric approaches
For the examples considered, one may suggests to directly estimate the
distributions, rather than the parameters of the distributions, i.e. to use
non-parametric approaches
Advantages
- there is no need to make specific distribution assumptions
- the non-parametric approaches are often only slightly less efficient than methods
that use correct parametric model, and generally more efficient compared with
methods that use the incorrect parametric model
Disadvantages
One may face the problem of overfitting (i.e. the number of parameters is, relative to
the sample size, too large). In the distribution examples, the parameters to be
estimated in an non-parametric approach are values of f(x) for all possible x.