Probability – Moment Generating Function of Ratio Distribution X/Y

functionsmoment-generating-functionsmoment-problemprobabilityprobability distributions

If we know the moment generating functions (MGFs) of the random variables $X$ and $Y$ to be $M_{X}(s)$ and $M_{Y}(s)$, respectively. The MGF of the sum $X+Y$ will $M_{X}(s) \cdot M_{Y}(s)$.

So what is the MGF of the ratio distribution $\displaystyle\frac{X}{Y}$?

Best Answer

It is nowhere near as neat. $$\begin{align}\mathsf M_{X/\, Y}(t) =&~ \mathsf E(e^{tX/\, Y}) \\[1ex]=&~\mathsf E(\mathsf E(e^{tX /\, Y}\mid Y)) \\[1ex]=&~ \mathsf E(\mathsf M_{X\mid Y}(t/Y))\end{align}$$

Now, if $X$ and $Y$ are independent (as required for the summation formula you gave) then this becomes: $$\begin{align}\mathsf M_{X/\, Y}(t) =&~ \mathsf E(\mathsf M_X(t/Y)) \end{align}$$

But it won't get any simpler than that except perhaps for special cases.

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