The average time between trades for a high-frequency trading investment firm is 40 seconds. Assume the time between trades is exponentially distributed. What is the probability that the time between trades for a randomly selected trade and the one proceeding it is more than a minute?
A) 0.2231
B) 0.4869
C) 0.5134
D) 0.7769

Question

Quizplus · Accepted Answer

The probability that the time between trades is more than a minute is given by the cumulative distribution function of the exponential distribution:P(X > 60) = 1 - P(X <= 60) = 1 - (1 - e^(-60/40)) = 0.2231Therefore, the probability that the time between trades for a randomly selected trade and the one proceeding it is more than a minute is 0.2231.

The Average Time Between Trades for a High-Frequency Trading Investment