Saturday, 14 September 2013

probability - Expected value of the minimum of a non-negative random variable and a constant




X is a non-negative random variable. Define Y = MIN(X, c) where c is a constant. What is E[Y]?
I am modeling the constant as another random variable whose pdf is Dirac Delta function: fc(x):=δ(xc). The mean and variance of this "constant random variable"(!) comes out as c and 0, but does this approach have enough mathematical rigor?


Answer



Assume that c>0 otherwise min(X,c)=c which is rather trivial. Then Y:=min(X,c) is a nonnegative variable and we have



E[Y]=0P(Y>t)dt=0P(X>t,c>t)dt=0P(X>t)1{c>t}dt=c0P(X>t)dt


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