153

CHAPTER 10

Inverse Gaussian Distribution

10.1 INTRODUCTION
The Inverse Gaussian Distribution (IGD) first appeared in the works of Louis Bachelier (1900) in his
doctoral thesis on the theory of speculation, and subsequently in Schrödinger (1915) in the theory of
linear Brownian motion (LBM). The probability density function (PDF1 ) of two-parameter version
is
p 
f .xI ; / D =.2x 3 / expf .x /2 g; for x > 0: (10.1)
22 x
The name “inverse Gaussian” was suggested by Tweedie (1957) [219], who noticed that there exists
an inverse relation between the cumulant generating function (CGF) of the distribution of time
needed to cover a constant distance, and the distance covered during constant time in LBM.2 This
is also called Tweedie’s distribution, Wald’s distribution, first-passage-time distribution of Brownian
motion, and as Hadwiger function in reproduction modeling (biological sciences).
Wald (1947) [225] derived the IGD as a limiting distribution of sample size in sequential
probability ratio tests (SPRT). As shown later, Wald’s distribution is a special case of IGD. It is
denoted by IG(; ) or IGD(; ), where  is the location parameter and  is the shape parameter.
An alternate notation is N 1 .; / where N denotes the normal (Gaussian) law. Both the param-
eters are positive (because  that appears inside the radical must be positive, and the variance being
3 = > 0 implies that  > 0).

10.1.1 ALTERNATE REPRESENTATIONS

p
As 1= 2 = 0.39894228, the PDF can be written as

f .xI ; / D 0:39894228 .=x 3 /1=2 expf .x /2 g; for x > 0: (10.2)
22 x

The  is denoted as a, and  by  in Brownian motion and some other fields. Separate the constant
in (10.1) to get another form as
p 
f .xI ; / D =.2/ x 3=2
expf .x /2 =xg; for x > 0: (10.3)
22

1 PDF is called electron probability density function or electron density in thermodynamics and computational chemistry.
2 Tweedie (1947) [218] also found such a relation among the binomial and negative binomial distributions, and between
Poisson and gamma distributions.

R. Chattamvelli et al., Continuous Distributions in Engineering and the Applied Sciences – Part II
© Springer Nature Switzerland AG 2021
154 10. INVERSE GAUSSIAN DISTRIBUTION
Expand .x /2 as a quadratic and divide each term by x to get
p 
f .xI ; / D =.2x 3 / expf .x= 2 C =x/g; for x > 0; ;  > 0: (10.4)
2

Take the constant in the exponent as a separate multiplier and put = D ı to get another form
p ı
f .xI ; ı/ D ı=.2x 3 / exp.ı/ expf .x= C =x/g; for x > 0; ; ı > 0: (10.5)
2

Taking  D =2 results in

p 1
f .xI ; / D =.2/x 3=2
exp.=2/ expf .x 1 C x/g; for x > 0: (10.6)
2

Put  D t 2 and 1= D  2 to get the alternate representation

p
f .xI t; / D t= 2x 3 exp.t 2  2 / expf t 2 =.2x/  2 x=2/g; for x > 0; t;  > 0: (10.7)

Tweedie discussed three other representations using  D 

p p
f1 .xI ˛; / D =.2x 3 / exp. 2˛/ expf =.2x/ ˛xg; (10.8)
p
f2 .xI ; / D ./=2x 3 exp./ expf =.2x/ x=.2//g; (10.9)

and
p
f3 .xI ; / D =2x 3 exp./ expf =.2x/  2 x=.2//g: (10.10)

These forms are used in different fields, and are related as f .xI ; / D f2 .x=I 1; /= D
f3 .x=I ; 1/=. As shown below, the mean is  and the variance is 3 =. Set 3 = D  so that
the mean and variance are equal, and 2 D . This results in a one-parameter IGD() with PDF
p
f .xI / D = 2x 3 exp. .x /2 =.2x//; for x > 0: (10.11)

Another one-parameter distribution results when  ! 1 in (10.1) with PDF

p
f .xI / D =.2x 3 / exp. =.2x//; for x > 0;  > 0: (10.12)

Ahmed et al. (2008) introduced a re-parameterization with PDF

 
p 1 p p
f .xI ; / D =. 2/.=x/ 3=2
exp . x= 2
 =x/ ; for x > 0;  > 0:
2
(10.13)