TRUNCATEDCAUCHYDI

STRI
BUTI
ON

I
ntr
oduct
ion

The Cauchy di str

ibuti
on,whi ch fi
rstappear ed in 1853,i sav ery signif
icantcontinuous
probabi l
i
tydistri
bution(Johnsonetal .
,vol-
1,2004).I
twast horoughl
yinvestigatedbynumer ous
researchers(Johnsonetal .,vol
-1,pp289–329, 2004).Ithasbeenusedi nmanydi ff
erentareas,
i
ncl udi
ngmechani calandel ect
ri
caltheory,physi
calanthropology,measurementandcal i
brati
on
i
ssues,model l
ingdept hmapdat a,pri
cingspeculati
veasset slikest
ockr eturns,andthephase
der i
vati
veofai rcomponent sinur banenv ir
onment s( NadarajahandKot z,2007a).Cauchy
distri
butionisjustaspopul arasthenor maldistr
ibut
ion, mostlyduetoit
smor eusefulnessasa
priordistri
buti
onandmor er eal
i
stictai
ls(Nadaraj
ahandKot z,2007b).

 Thepdfofr
ightt
runcat
eddi
str
ibut
ion:

f(x) f(
x)
f
(x)= B = -
∞ <X<B
∫A
f(
x )
dx F(
B)

Thecor
respondi
ngcdfi
s:
x
H(
X)= ∫h(x)dx= FF((Bx))
-
∞
x<B

 Thepdfofl
eftt
runcat
eddi
str
ibut
ion:

f
(x) f
(x)
(
fx)= ∞ = A<X<∞
∫A
(
fx)
dx 1-
F(A)

Thecor
respondi
ngcdfi
s:
x
F(x)-
F(A)
H( ∫
X)= h(
x)
A
dx=
1-F(A)
A<X<B

 Thepdfofdoublet
runcat
eddi
str
ibut
ionoft
hel
eftt
runcat
ionpoi
ntAandr
ightt
runcat
ion
poi
ntBisgivenby:

f(x) f(
x)
f
(x)= B = A<X<B
∫A
f(
x d
)x F(
B)-F(
A)

Thecor
respondi
ngcdfi
s:
x
F(
x)-
F(A)
H( ∫
X)= h(
x)
A
dx=
F(
B)-
F(A)
A<X<B

ThepdfofCauchyDi
str
ibut
ioni
sgi
venby
:

1 1
(
fx)= -
∞ <X<∞ λ>0 -
∞ <θ<∞
λπ x-θ2
1+( )
λ

Wher
eθandλar
ethel
ocat
ionandscal
epar
amet
err
espect
ivel
y.
Doubl
eTr
uncat
edDi
str
ibut
ion:
Thepdfofdoubl
etr
uncat
eddi
str
ibut
ion.

1 1
λπ x- θ2
1+( )
λ
f
(x)= B A<X<B λ>0 -
∞ <θ<∞
1 1
∫
Aλπ x- θ2
dx
1+( )
λ

Takedenomi
nat
or,

1 1
∫
B
dx
λπ A θ2
x-
1+( )
λ
x-
θ
Let =u,x-
θ=λu,
dx=λdu
λ
A-
θ B- θ
<u<
λ λ
B-
θ

=∫λ1π1+1(u) λdu
λ
A-
θ
λ
2

1 B-
θ A-
θ
= λtan-1( ) -
tan-1( )
λπ λ λ

Nowputt
hisr
esul
tint
hepdfofDoubl
etr
uncat
eddi
str
ibut
ion:

1 1
λπ x- θ2
1+( )
λ
f
(x)= A<X<B
1
λπ
λ[
t
B-
θ
an-1( )
λ
-an-1
t ( )
A-
θ
λ
]

1 λ
f
( =
x) A<X<B
( )
2
1 B
- -
θ 1 A
- -
θ 1+(
x-θ)
an ( )
t -
tan
λ λ
Thi
sist
hepdfofDoubl
eTr
uncat
edDi
str
ibut
ion.

CDFOFTRUNCATEDDI
STRI
BUTI
ON
 1 λ x-
θ
2 dx
x
CDF=∫ l
et =u,x-
θ=λu,
1 B-
θ 1 A-
( )
θ 1+(
x-θ) λ
A
- -
t
an ( ) -
tan
λ λ
dx=λdu
x-
θ
1 1
2du
=∫λ
1 B-
θ 1 A-
θ 1+(
( )
A-θ
- - u)
λ t
an ( ) -
tan
λ λ

F(
X)=
t
X-
θ
an-1( )
λ
-
tan-1 (Aλ-θ)
[t
B-
θ
an-1( )
λ
t
-an-1 (Aλ-θ)]
PROPERTI
ESOFDTCD

1:Mean

x λ
2dx
B
MeanE(
X)=∫
1 B-
θ 1 A-
( )
θ 1+(
x-θ)
A
- -
an ( )
t -
tan
λ λ
x-
θ
Let =u,x-
θ=λu,
dx=λdu x=ϑ+λu
λ
B-
θ
ϑ+λu 1
∫λ
2du
1 B-
θ 1 A-
θ 1+(
u)
( )
A-
θ
- -
an ( )
t
λ -
tan
λ λ

B-
θ
ϑ 1 B-
θ
λμ 1
2du 2du
=∫λ +∫λ
B-
θ
( )
A-
θ
( ) B-
θ A-
θ
A-θ A-θ
λt -
1 -
1 1+(
u) -
1 -
1 1+(
u)
an ( ) -
tan an ( )
λt -
tan
λ λ λ λ

an ( )
2 2
B-θ-
1 A-θ -
1 B-θ A-
θ
ϑ an ( )
t -t ) λl
n (
1+ ) -
λln (
1+
λ λ λ λ
= +
an ( ) 2t an ( )
-
1B-
θ A-θ -
1 B-θ A-θ-
1 -
1
t
an ( ) -t an ( ) -t
λ λ λ λ
 2 2
B-
θ A-
θ
λln [(1+ )/ (1+ )]
λ λ
Mean=θ+
2t
B-
θ
an-1( )
λ
-
tan-1
A-
λ
θ
( )
2:Var
iance=E(
X2)
-[E(
X)2
]
B-
θ
( 2
ϑ+λu) 1
E(
X)=
2
∫ -1 B-θ -1 A-θ 1+(u)2 du
λ

( )
A-
θ
t
an ( )
λ -
tan
λ λ
=
B-
θ
( 2
ϑ) 1 B-θ
( 2
λu) 1 B-θ
2λθ
∫λ du+∫λ du+∫λ

( ) ( )
2 2
A-θ
B-
θ A-
θ 1+(
u) A-θ
B-
θ A-
θ 1+(
u) A-θ
B-
θ
an-1( )
λt -an-1
t λt an-1( ) -an-1
t λt an-1( ) -an-1
t
λ λ λ λ λ
=

( 2
ϑ) B-
θ
an ( )
t -
tan ( )+
A-
θ
-
1
( λ λ)
B-θA+θ
-
-
1
λ2
an ( ) an ( )
B-
θ-
1 A-
θ -
1 λ λ B-
θ A-
θ -
1 -
1
t
an ( ) -
t an ( )
t -
t
λ λ λ λ
λ2+(B- θ)2
λθln (2
( )
2
1 B
- -
θ 1 A
- -
θ λ+( A- θ)
[
-an ( )+t
t an ]
+
λ λ
t
B-
θ
an-1( )
λ
-tan-1
A-
λ
θ
( )
λ2+(B-
θ)2
λ(
B-A) +λθln (2 2
λ+( A-
θ)
E(
X)
2
=( 2
ϑ)- ( 2
λ)+
t
B-
an-1( )
λ
θ
-an-1
t
A-
λ
θ
( )
Var
iance=E(
X2)
-[E(
X)2
]

( ]
2
λ2+( 2 2 2
B-θ) B-
θ A-
θ
λ(
B-A)+λθln (2 2 λl
n [
(1+ )/1+( )]
λ+(A-θ) λ λ
Var
iance=( 2
ϑ)- ( 2
λ)+ -
(θ+ )
t 1 B
- -
an ( )
λ
θ
-t
an-1 A
λ
-
θ
( )
2t 1 B
- -
θ
an ( )
λ
t
-an1 A
- -
θ
λ ( )
 ( ]
2 2 2
B-
θ A-
θ
λl
n [
(1+ )/1+( )]
λ(
B-A) λ λ
Var
iance= -
( 2
λ)[(
1+ )]
t 1 B
- -
θ
an ( )
λ
-
tan1 A
-
λ
-
θ
( ) 2t 1 B
- -
θ
an ( )
λ
-
tan1 A
- -
θ
λ ( )
Andst
andar
ddev
iat
ioni
nequal
tot
hesquar
erootofv
ari
ance.

4:Recur
rencer
elat
ionf
orMoment
s:
Ther
thmomentaboutt
hepoi
ntX=θi edbyu'
sdenot (
r
θ)andi
sgi
venby

∫
B
r
u'
(
r
θ)= (
X-θ)f
(x)
dx
A

∫
B
r
u'
(
r
θ)= (
X-θ)f
(x)
dx
A

1 1(
X-
r
θ)
∫
B
dx
A
t 1 B
- -
θ
an ( )
λ
-
tan1 A
-
λ
-
θ
( ) ()
λ[
θ2
1+x- ]
λ

1 B-
θ
u)
r λ (
r
= λ)∫
( 2du
1 B
- -
θ
an ( )
t
λ
-
tan1 A
-
λ( )
-
θ Aλ-θ1+(u)

B-
θ
1 r λ( 1+u2)
(u)r
-2
-(
u)r
-2
= ( ∫
λ) A-θ du
( )
2
1 B
- -
θ 1 A
- -
θ 1+(u)
tan ( ) -
tan λ
λ λ

B-A
u'
(θ)
=λ -
( 2 '
λ)ur-2(
θ)
1 B-
θ 1 A-
θ
( )
r
- -
(
r-
1)an ( )
t -
tan
λ λ
Putr
=2wehav
e:

B-
A
u'(θ)
=λ -
( 2
λ)
B-
θ
( )
A-
θ
2

an-1( )
t t
-an-1
λ λ
5:Mode:
TheDTCDi
suni
modal
andt
hemodeoccur
satt
hepoi
ntX=θ.
 '
Modei
sthatv
alueofxf
orwhi
chf
(x)i
smaxi
mum t
hati
smodei
sthesol
uti
onoff
(x)=0,
'
'
pr
ovi
dedt
hatf(
x)<0.Fort
hepdfofDTCDt
hemodei
s:
'
(
fx)=0

x=θ

(
'
'
Andf
x)
=-
2/
{
[t
an ( -
1 B-
θ
λ
)
-an-1
t ( )]
A-
θ 3
λ
}
(λ) <0

6:Quar
ti
le:
I
fQpi
sthept
hquar
ti
le,
thenF(
Qp)=pi
mpl
i
es,

1 1
dx=p
( )[ ( )]
Qp
F( x≤Qp)=∫
Qp)=p( 1 B
- -
θ 1 A
- -
θ θ2
an ( )
t -
tan λ1+x-
A
λ λ λ

Qp-
θ
1 1
= ∫ -1 B-θ -1 A-θ 1+(u)2 du=p
λ

( )
A-
θ
t
an ( )
λ t
-an
λ λ

=
t
Q-
λ
θ
an-1( p )-tan-1 ( )
A-
θ
λ
=p
t -1 B
an ( )
λ
-
θ
-t
an 1 A
-
( )
λ
-
θ

Qp =θ+λt
an [
p(t
an ( -
1 B-
θ
λ
)
-t ( )
an-1
A-
θ
λ
+t ( )
an-1
A-
θ
λ
)
]

I
fp=0.
5,t
henwegett
hemedi
an.

Q0.5=θ+λt
an [
0. t
5(an ( -
1 B-
θ
λ
)
-tan-1( )
A-
θ
λ
+t ( )
an-1
A-
θ
λ
)
]

Thi
sist
hemedi
anoft
het
runcat
edCauchydi
str
ibut
ion.

I
fweputp=0.
25and0.
75t
henwegett
hef
ir
standt
hir
dquar
ti
le.
Char
act
eri
sti
csFunct
ion:

7:Sur
viv
alFunct
ion:1-
F(x)

Sur
viv
alf
unct
ion

8:Hazar
dFunct
ion:f
(x)
/sur
viv
alf
unct
ion

H.
F:=

9:Cumul
ati
veHazar
dfunct
ion:
Par
amet
erEst
imat
ion
Maxi
mum Li
kel
ihoodMet
hod
Foranygi
venθandλt
hev
alueofLwi
l
lbemaxi
mum wi
thr oAandB
espectt

Whent
B-
θ
an-1( )
λ
t
-an-1
A-
θ
λ( )
i
smi
nimum.Denot
ingt
heor
derst
ati
sti
cs

Cor
respondi
ngtothesampl
ebyA<x1<x2<…<xn<B,theaboveexpr
essi
onwill
bemi ni
mum
̂ ̂
whenA=x 1
andA=xn.Hencet
heMLEsofAandBareA =x1andB =xnrespect
ivel
y.Now,
the
l
og-l
i
keli
hoodfunct
ioni
s:
n

l
ogL=-
nlogt
B-
θ
an ( )
λ[-
t -
1
an-1
A-
θ
λ
+nl( )]
ogλ- l λ2+(
og { x- 2
θ)}∑ i
-1

Thecor
respondi
ngmaxi
mum l
i
kel
i
hoodequat
ionsar
e,

dl
ogL
dx
=-
nlogt -
[
1 B-
θ
an ( )
λ
-
tan-
( )]
1 A
λ
θ -1
-
[2
-
λ
λ+(
B- 2+ 2
θ) λ+(
λ
A- 2]
θ)
+∑n
i
-
2(
1 2
λ+(
x-θ)
x-
θ)2 =0

[ an ( )
λ ] λ+(
-
1
dl
ogL B-
θ -
1 A-
θ B-
-
1θ A-θ n 2λ n
=-
nlogt
an ( ) -
t [ + 2 ]
+ -
2∑ 2 = 2 1 2 2
dx λ B-θ) λ+(A-θ) λ λ+(x
-θ) i
-

0
Theparameter
sθandλandmaybeest i
matednumerical
l
ybysol
vi
ngtheabovetwoequati
ons
usi
ngit
erat
iveprocedures,
suchastheNewtonRaphsonmet
hod,wi
thsuf
fi
cient
lycl
oseini
ti
al
val
uessothattheprocedureconv
erger
api
dlytosol
uti
on.

Ref
erences

1. Nadar
ajah,
S.,
&Kot
z,S.(
2007)
.Skewmodel
sI.
 Act
aappl
i
candaemat
hemat
icae,
98(
  1),
1-28.

2. Nadar
ajah,
S.,
&Kot
z,S.(
2006)
.At
runcat
edCauchydi
str
ibut
ion.

3. Ar
nol
d,B.C.
,&Beav
er,
R.J.(
2000)
.Theskew-
Cauchydi
str
ibut
ion.
 St
ati
sti
cs&pr
obabi
l
ity
l
ett
ers,
49(
  3),
285-
290.