easy · Quantitative Finance quant-logic
Under what structural condition does the linearity of expectation, defined as E[X + Y] = E[X] + E[Y], hold for two random variables X and Y?
- It holds only if X and Y are jointly normally distributed random variables.
- It holds for all random variables, regardless of their correlation or dependency.
- It holds only if the covariance term Cov(X, Y) is computed and equals exactly zero.
- It holds only if X and Y are statistically independent of one another in the joint distribution.
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