TERM PAPER

OF

MTH-202

TOPIC-DIFFERENCE BETWEEN POISSON

DISTRIBUTION AND BINOMIAL DISTRIBUTION

SUBMITTED TO: SUBMITTED BY:

MISS.POOJA MAM YASHU DHINGRA
ROLL NO-A104
REG NO-3010070035
 ACKNOWLEDGEMENT
I m extremely grateful and remain indebted to my guide POOJA MAM for
being a source of inspiration and for her constant support in the Design,
Implementation and Evaluation of the project. I m thankful to her for her
constant constructive criticism and invaluable suggestions, which
DIFFERENCE
benefited me a lot while developing the project on “
BETWEEN POISSON DIDSTRIBUTION AND
BINOMIAL DISTRIBUTION

She has been a constant source of inspiration and motivation for hard
work. She has been very co-operative throughout this project work.
Through this column, it would be my upmost pleasure to express my
warm thanks to her for her encouragement, co-operation and consent
without which i mightn’t be able to accomplish this project.

I also express my gratitude to POOJA mam for providing me the

infrastructure to carry out the project and to all staff members who were
directly and indirectly instrument in enabling me to stay committed for
the project.
Throughout the project the focus has been on presenting
information and comments in an easy and intelligible manner. The
project is very useful for those who want to know about this.
In the last, I gratefully acknowledge and express my gratitude to all
staff members and friends who supported me in preparing this project

Yashu Dhingra
DIFFERENCE BETWEEN POISSON DIDSTRIBUTION
AND BINOMIAL DISTRIBUTION

The Poisson distribution

Poisson
Probability mass function

The horizontal axis is the index k. The function is only defined at integer values of k. The
connecting lines are only guides for the eye.

Cumulative distribution function

The horizontal axis is the index k. The CDF is discontinuous at the integers of k
and flat everywhere else because a variable that is Poisson distributed only
takes on integer values.
Poisson noise and characterizing small occurrences
The parameter λ is not only the mean number of occurrences E[k], but
also its variance σ2k = E[k2] − E[k]2 (see Table). Thus, the number of
observed occurrences fluctuates about its mean λ with a standard
deviation σk = √λ. These fluctuations are denoted as Poisson noise or
(particularly in electronics) as shot noise.
The correlation of the mean and standard deviation in counting
independent, discrete occurrences is useful scientifically. By monitoring
how the fluctuations vary with the mean signal, one can estimate the
contribution of a single occurrence, even if that contribution is too small
to be detected directly. For example, the charge e on an electron can be
estimated by correlating the magnitude of an electric current with its shot
noise. If N electrons pass a point in a given time t on the average, the
mean current is I = eN / t; since the current fluctuations should be of the
order σI = e√N / t (i.e. the standard deviation of the Poisson process), the
charge e can be estimated from the ratio An everyday example is the
graininess that appears as photographs are enlarged; the graininess is
due to Poisson fluctuations in the number of reduced silver grains, not to
the individual grains themselves. By correlating the graininess with the
degree of enlargement, one can estimate the contribution of an individual
grain (which is otherwise too small to be seen unaided). Many other
molecular applications of Poisson noise have been developed, e.g.,
estimating the number density of receptor molecules in a cell membrane.

In probability theory and statistics, the Poisson distribution (pronounced (or

Poisson law of small numbers is a discrete probability distribution that
expresses the probability of a number of events occurring in a fixed period of
time if these events occur with a known average rate and independently of the
time since the last event. (The Poisson distribution can also be used for the
number of events in other specified intervals such as distance, area or volume.)
The distribution was first introduced by Siméon-Denis Poisson (1781–1840) and
published, together with his probability theory, in 1838 in his work Recherches
sur la probabilité des jugements en matière criminelle et en matière civile
(“Research on the Probability of Judgments in Criminal and Civil Matters”). The
work focused on certain random variables N that count, among other things, the
number of discrete occurrences (sometimes called “arrivals”) that take place
during a time-interval of given length.
If the expected number of occurrences in this interval is λ, then the probability
that there are exactly k occurrences (k being a non-negative integer, k = 0, 1,
2, ...) is equal to

where
• e is the base of the natural logarithm (e = 2.71828...)
• k is the number of occurrences of an event— the probability of which is
given by the function
• k! is the factorial of k
• λ is a positive real number, equal to the expected number of occurrences
that occur during the given interval. For instance, if the events occur on
average 4 times per minute, and one is interested in the probability of an
event occurring k times in a 10 minute interval, one would use a Poisson
distribution as the model with λ=10×4=40.
As a function of k, this is the probability mass function. The Poisson distribution
can be derived as a limiting case of the binomial distribution.
The Poisson distribution can be applied to systems with a large number of
possible events, each of which is rare. A classic example is the nuclear decay of
atoms.
The Poisson distribution is sometimes called a Poissonian, analogous to the
term Gaussian for a Gauss or normal distribution.

When we try to build a mathematical model for this kind of processes, we

should keep these characteristics in mind. In fact, the characteristics pave the
way to the appropriate model, as we will demonstrate now. It is quite important
that you see how this works. Doing computations in a given model is one thing,
but to make an appropriate model is obviously of the highest importance. If the
model is not appropriate, then any computation in it has very little, if any, value.
Approach 1. (via waiting times)Perhaps the most natural thing to do is to con-
centrate on the waiting times. Point (1) above suggests that the waiting time
distribution should be the same at all times: the waiting time between the 6th
and 7th event should have the same distribution as the waiting time between the
12th and 13th.
Point (3) above suggests that the process should have no memory. We have
come across a continuous distribution with a certain lack of memory property.
Indeed, in Exercise?? we showed that the exponential distribution has no
memory in the sense that whenX has such an exponential distribution, then
P( X > s+ t| X > t) = P( X > s) .
If we think ofX as the waiting time between successive occurrences, than this
formula expresses the idea that the fact that we have waited alreadyt time units
does not change the probability that we have to wait anothers time units. This
property makes the exponential distribution a serious candidate for the waiting
times between successive occurrences.
The candidacy of the exponential distribution becomes even better motivated
when we look back at Example??. In this example we showed that the
exponential distribution is a very natural candidate to model the waiting time for
the next occurrence.
Hence we might be inclined to define the following model. We consider in-
dependent random variablesX1 ,X2 ,..., which are exponentially distributed with
parameterλ, that is, they have densityf given by
f(x) = λe−λx,
forx > 0, andf (x) = 0 forx < 0. The first occurrence is at timeX1, the second
at timeX1 +X2, et cetera. In general, we can define

Approach 2. (via the number of occurrences)Another approach becomes

apparent
when we look back at Example??. In that example, we undertook the enterprise
to model the arrival of customers in a shop between timet = 0 andt = 1, not by
focussing on the waiting times, but by concentrating on the number of
customers. The waiting time should be a continuous random variable, but the
number of customers is obviously discrete. Using a discrete approximation with
the binomial distribution, we showed that it is reasonable to assume that the
probability of havingk customers in the shop between time 0 and time 1 is equal
to
P(N= k) = e−λλk
k!,
fork = 0, 1,..., which we recognize as the probability mass function of a Poisson
distribution with parameterλ.
This approach does not tell us immediatelywhen the customers arrive, it only
tells us that in a given time interval the number of customers should have a
Poisson distribution, with a parameter which is proportional to the length of the
interval. Since we want our process to be stationary, it is reasonable to
distribute all customers over the interval in a completely arbitrary way. The
model then amounts to the following two-step procedure for defining a process
on any time interval of lengthL:

It is not a priori clear that this approach leads to the same model as in Approach
1. We shall see shortly that they are, in fact, equivalent. At this point, we only
note the following connection: the probability that there is no occurrence before
timet is, according to the current approach, equal toe−λt. Now note that this is
equivalent to saying that the waiting time for the first occurrence has an
exponential distribution with parameterλ, in full agreement with Approach 1.

Approach 3. (via differential equations)Still, there are other ways to approach

the
problem, without reference to earlier exercises or examples.

The Poisson process defined and studied so far seems to be a very reasonable
model for the type of processes we have in mind. It is also a very interesting and
subtle construction from a pure mathematical point of view, showing a nice
interplay between discrete and continuous distributions. In the next sections,
we shall explore some more of its properties.
The waiting time paradox
The waiting times between successive occurrences have exponential
distributions by construction.

A Poisson experiment is a statistical experiment that has the following

properties:

• The experiment results in outcomes that can be classified as successes

or failures.
• The average number of successes (μ) that occurs in a specified region is
known.
• The probability that a success will occur is proportional to the size of the
region.
• The probability that a success will occur in an extremely small region is
virtually zero.
Note that the specified region could take many forms. For instance, it could be a
length, an area, a volume, a period of time, etc.

Notation
The following notation is helpful, when we talk about the Poisson distribution.

• e: A constant equal to approximately 2.71828. (Actually, e is the base of

the natural logarithm system.)
• μ: The mean number of successes that occur in a specified region.
• x: The actual number of successes that occur in a specified region.
• P(x; μ): The Poisson probability that exactly x successes occur in a
Poisson experiment, when the mean number of successes is μ.

Poisson Distribution
A Poisson random variable is the number of successes that result from a
Poisson experiment. The probability distribution of a Poisson random variable
is called a Poisson distribution.

Given the mean number of successes (μ) that occur in a specified region, we
can compute the Poisson probability based on the following formula:

Poisson Formula. Suppose we conduct a Poisson experiment, in which the

average number of successes within a given region is μ. Then, the Poisson
probability is:

P(x; μ) = (e-μ) (μx) / x!

where x is the actual number of successes that result from the experiment, and
e is approximately equal to 2.71828.

The Poisson distribution has the following properties:

• The mean of the distribution is equal to μ .

• The variance is also equal to μ .

Example 1

The average number of homes sold by the Acme Realty company is 2 homes
per day. What is the probability that exactly 3 homes will be sold tomorrow?

Solution: This is a Poisson experiment in which we know the following:

• μ = 2; since 2 homes are sold per day, on average.

• x = 3; since we want to find the likelihood that 3 homes will be sold
tomorrow.
• e = 2.71828; since e is a constant equal to approximately 2.71828.

Definition of the Poisson distribution

The Poisson distribution is therefore defined as the limit of the B(n, p) binomial
distribution under the following conditions :
* n tends to infinity,
* p tends to 0,
while the product np keeps the same constant value λ.

This definition can be generalized to the case where np only converges to a

positive limit λ as n grows without limit.
The Poisson distribution is defined over the set of integers (including 0), and
depends only on the single positive parameter λ (whereas the binomial
distribution depended on the two parameters n and p). So all binomial
distributions with a given value λ of the product np can be approximated by the
same Poisson(λ) distribution for large values of n, the approximation being all
the better that n is larger (and therefore p smaller).

Properties of the Poisson distribution

Probability mass function

The probability mass function of the Poisson distribution is :

Mean
The mean of the Poisson distribution is :
 E[X] = λ

Variance
The variance of the Poisson distribution is :
Var(X) = λ

Note that the variance is equal to the mean.

Moment generating function

The mgf of the Poisson distribution is :

M(t) = exp{λ(et - 1)}

We'll establish this result both :

* By direct calculation,
* And by calculating the limit of the moment generating function of
the binomial distribution when n tends to infinity with np tending to a limit λ. The
convergence property of the mgf then tells us that this limit is the mgf of the
Poisson distribution.

Generating function
We show here that the generating function of the Poisson distribution is

G(s) = eλ(s - 1)

Animation
This animation simulates the Poisson distribution as follows :
1) Observations are drawn repetitively from the exponential distribution
Exp(λ) (yellow upper frame of the animation).
2) The values of these observations are added until the sum exceeds 1.
3) Suppose that the sum of the first k observations is less than 1, but that the (k
+ 1)th observation makes the sum exceed 1. The integer k is then considered as
an observation drawn from the Poisson(λ) distribution.

The Binomial Distribution

In probability theory and statistics, the binomial distribution is the discrete

probability distribution of the number of successes in a sequence of n
independent yes/no experiments, each of which yields success with probability
p. Such a success/failure experiment is also called a Bernoulli experiment or
Bernoulli trial. In fact, when n = 1, the binomial distribution is a Bernoulli
distribution. The binomial distribution is the basis for the popular binomial test
of statistical significance.
It is frequently used to model number of successes in a sample of size n from a
population of size N. Since the samples are not independent (this is sampling
without replacement), the resulting distribution is a hypergeometric distribution,
not a binomial one. However, for N much larger than n, the binomial distribution
is a good approximation, and widely used.

Examples
An elementary example is this: roll a standard die ten times and count the
number of fours. The distribution of this random number is a binomial
distribution with n=10 and p=1/6.
As another example, flip a coin three times and count the number of heads. The
distribution of this random number is a binomial distribution with n=3 and p=1/2.
To understand binomial distributions and binomial probability, it helps to
understand binomial experiments and some associated notation; so we cover
those topics first.

Binomial Experiment
A binomial experiment (also known as a Bernoulli trial) is a statistical
experiment that has the following properties:

• The experiment consists of n repeated trials.

• Each trial can result in just two possible outcomes. We call one of these
outcomes a success and the other, a failure.
• The probability of success, denoted by P, is the same on every trial.
• The trials are independent; that is, the outcome on one trial does not
affect the outcome on other trials.

Consider the following statistical experiment. You flip a coin 2 times and count
the number of times the coin lands on heads. This is a binomial experiment
because:

• The experiment consists of repeated trials. We flip a coin 2 times.

• Each trial can result in just two possible outcomes - heads or tails.
• The probability of success is constant - 0.5 on every trial.
• The trials are independent; that is, getting heads on one trial does not
affect whether we get heads on other trials.

Notation
The following notation is helpful, when we talk about binomial probability.

• x: The number of successes that result from the binomial experiment.

• n: The number of trials in the binomial experiment.
• P: The probability of success on an individual trial.
• Q: The probability of failure on an individual trial. (This is equal to 1 - P.)
• b(x; n, P): Binomial probability - the probability that an n-trial binomial
experiment results in exactly x successes, when the probability of
success on an individual trial is P.
• nCr: The number of combinations of n things, taken r at a time.

A binomial random variable is the number of successes x in n repeated trials of

a binomial experiment. The probability distribution of a binomial random
variable is called a binomial distribution (also known as a Bernoulli
distribution).

Suppose we flip a coin two times and count the number of heads (successes).
The binomial random variable is the number of heads, which can take on values
of 0, 1, or 2. The binomial distribution is presented below.

Number of Probabilit
heads y
0 0.25
1 0.50
2 0.25

The binomial distribution has the following properties:

• The mean of the distribution (μx) is equal to n * P .

• The variance (σ2x) is n * P * ( 1 - P ).
• The standard deviation (σx) is sqrt[ n * P * ( 1 - P ) ].

Binomial Probability
The binomial probability refers to the probability that a binomial experiment
results in exactly x successes. For example, in the above table, we see that the
binomial probability of getting exactly one head in two coin flips is 0.50.

Given x, n, and P, we can compute the binomial probability based on the

following formula:

Binomial Formula. Suppose a binomial experiment consists of n trials and

results in x successes. If the probability of success on an individual trial is P,
then the binomial probability is:

b(x; n, P) = nCx * Px * (1 - P)n - x

Example 1

Suppose a die is tossed 5 times. What is the probability of getting exactly 2

fours?

Solution: This is a binomial experiment in which the number of trials is equal to

5, the number of successes is equal to 2, and the probability of success on a
single trial is 1/6 or about 0.167. Therefore, the binomial probability is:

b(2; 5, 0.167) = 5C2 * (0.167)2 * (0.833)3

b(2; 5, 0.167) = 0.161

In statistics the so-called binomial distribution describes the possible number of

times that a particular event will occur in a sequence of observations. The event
is coded binary, it may or may not occur. The binomial distribution is used when
a researcher is interested in the occurrence of an event, not in its magnitude.
For instance, in a clinical trial, a patient may survive or die. The researcher
studies the number of survivors, and not how long the patient survives after
treatment. Another example is whether a person is ambitious or not. Here, the
binomial distribution describes the number of ambitious persons, and not how
ambitious they are.
The binomial distribution is specified by the number of observations, n, and the
probability of occurence, which is denoted by p.
A classic example that is used often to illustrate concepts of probability theory,
is the tossing of a coin. If a coin is tossed 4 times, then we may obtain 0, 1, 2, 3,
or 4 heads. We may also obtain 4, 3, 2, 1, or 0 tails, but these outcomes are
equivalent to 0, 1, 2, 3, or 4 heads. The likelihood of obtaining 0, 1, 2, 3, or 4
heads is, respectively, 1/16, 4/16, 6/16, 4/16, and 1/16. In the figure on this page
the distribution is shown with p = 1/2 Thus, in the example discussed here, one
is likely to obtain 2 heads in 4 tosses, since this outcome has the highest
probability.

Other situations in which binomial distributions arise are quality control, public
opinion surveys, medical research, and insurance problems.

Poisson Limit

If the probability p is small and the number of observations is large the binomial
probabilities are hard to calculate. In this instance it is much easier to
approximate the binomial probabilities by poisson probabilities. The binomial
distribution approaches the poisson distribution for large n and small p. In the
movie we increase the number of observations from 6 to 50, where the
parameter p in the binomial distribution remains 1/10. The movie shows that the
degree of approximations improves as the number of observations increases.

A Simple Example
The four possible outcomes that could occur if you flipped a coin twice . four
outcomes are equally likely: each has probability . To see this, note that the
tosses of the coin are independent (neither affects the other). Hence, the
probability of a head on Flip 1 and a head on Flip 2 is the product of Pr[H] and
Pr[H] , which is 1/2×1/2=1/4. The same calculation applies to the probability of a
head on Flip one and a tail on Flip 2. Each is 1/2×1/2=1/4.
Outcom First Second
e Flip Flip
1 Heads Heads
2 Heads Tails
3 Tails Heads
4 Tails Tails
Table 1: Four Possible Outcomes
The four possible outcomes can be classifid in terms of the number of heads
that come up. The number could be two (Outcome 1), one (Outcomes 2 and 3) or
0 (Outcome 4). The probabilities of these possibilities. Since two of the
outcomes represent the case in which just one head appears in the two tosses,
the probability of this event is equal to 1/4+1/4=1/2. summarizes the situation.
Number of Probabilit
Heads y
0 1/4
1 1/2
2 1/4
Table 2: Probabilities of Getting 0,1, or 2 heads.

Figure 1: Probabilities of 0, 1, and 2 heads.

The Binomial Distribution
In many cases, it is appropriate to summarize a group of independent
observations by the number of observations in the group that represent one of
two outcomes. For example, the proportion of individuals in a random sample
who support one of two political candidates fits this description. In this case,
the statistic is the count X of voters who support the candidate divided by the
total number of individuals in the group n. This provides an estimate of the
parameter p, the proportion of individuals who support the candidate in the
entire population.
The binomial distribution describes the behavior of a count variable X if the
following conditions apply:
1: The number of observations n is fixed.
2: Each observation is independent.
3: Each observation represents one of two outcomes ("success" or
"failure").
4: The probability of "success" p is the same for each outcome.

If these conditions are met, then X has a binomial distribution with parameters n
and p, abbreviated B(n,p).

Mean and Variance of the Binomial Distribution

The binomial distribution for a random variable X with parameters n and p
represents the sum of n independent variables Z which may assume the values
0 or 1. If the probability that each Z variable assumes the value 1 is equal to p,
then the mean of each variable is equal to 1*p + 0*(1-p) = p, and the variance is
equal to p(1-p). By the addition properties for independent random variables, the
mean and variance of the binomial distribution are equal to the sum of the
means and variances of the n independent Z variables, so
These definitions are intuitively logical. Imagine, for example, 8 flips of a coin. If
the coin is fair, then p = 0.5. One would expect the mean number of heads to be
half the flips, or np = 8*0.5 = 4. The variance is equal to np(1-p) = 8*0.5*0.5 = 2.
Sample Proportions

Normal Approximations for Counts and Proportions

For large values of n, the distributions of the count X and the sample proportion
are approximately normal. This result follows from the Central Limit Theorem.
The mean and variance for the approximately normal distribution of X are np
and np(1-p), identical to the mean and variance of the binomial(n,p) distribution.

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