Do The Math Q16

Do The Math Q16

The stock prices of two companies at the end of any given year are modeled with random variables X and Y that follow a distribution with joint density function

What is the conditional variance of Y given that X = x ?

  1. 1/12 Correct Answer
  2. 7/6
  3. x + 1/2
  4. x2 – 1/6
  5. x2 + x + 1/3

Solution: A

Let f1(x) denote the marginal density function of X. Then