Solved – Computing variance from moment generating function of exponential distribution

exponential distributionmoment-generating-functionmomentsvariance

I'm wondering how to get variance of exp. distribution from the raw variance computed using the moment generating function. Here's my line of reasoning:

PDF of Exponential distriution is

$$
p_X(x) = \lambda \cdot e^{-\lambda x}
$$

for $x > 0$, and $0$ for $x \leq 0$.

Deriving the MGF:

$$
\begin{aligned}
M_X(t) &= \mathbb{E}\left[e^{t X}\right] && \text{definition} \\
&= \int_{- \infty}^{\infty} x \cdot p_X(x) dx&& \text{just definition of expectation} \\
&= \int_{- \infty}^{\infty} e^{t x} \cdot \lambda e^{-\lambda x} dx&& \text{LOTUS} \\
&= \int_{0}^{\infty} e^{t x} \cdot \lambda e^{-\lambda x} dx&& \text{since } x > 0 \\
&= \lambda \int_{0}^{\infty} e^{t x} \cdot e^{-\lambda x} dx&& \text{the constant multiple rule} \\
&= \lambda \int_{0}^{\infty} e^{t x -\lambda x} dx \\
&= \lambda \int_{0}^{\infty} e^{x (t -\lambda )} dx \\
&= \lambda \cdot \frac{1}{\lambda – t} && \text{closed form solution for } t < \lambda \\
&= \frac{\lambda}{\lambda – t} \qquad \boxed{\checkmark} \text{ Wikipedia check}
\end{aligned}
$$

Getting moments of exponential distributions by derivating MGF

$$
M_X(t) = \frac{\lambda}{\lambda – t}
$$

First moment (expectation)

$$
M_X^{(1)}(t) = \frac{\partial}{\partial t} \left( \frac{\lambda}{\lambda – t} \right) = \frac{\lambda}{(\lambda – t)^2}
$$

  • And evaluate at $t = 0$:

$$
\frac{\lambda}{(\lambda – t)^2} \bigg\vert_{t=0} = \frac{\lambda}{\lambda^2} = \frac{1}{\lambda} \qquad \boxed{\checkmark} \text{ Wikipedia check}
$$

Second moment

$$
M_X^{(2)}(t) = \frac{\partial^2}{\partial^2 t} \left( \frac{\lambda}{\lambda – t} \right) = \frac{2 \lambda}{(\lambda – t)^3}
$$

$$
\frac{2 \lambda}{(\lambda – t)^3} \bigg\vert_{t=0} = \frac{2}{\lambda^2}
$$

So this is raw variance but not the actual variance $\frac{1}{\lambda^2}$… how to get there?

Best Answer

$M_X^{(2)}(0)$ is not a variance, it is $E(X^2)$. So the variance can be obtained by $$Var(X) = E(X^2) - E(X)^2 = M_X^{(2)}(0) - [M_X^{(1)}(0)]^2 = \frac{1}{\lambda^2}$$

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