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Average value of Phi at a standard normal draw

Question

Let XX be standard normal and let MM denote the standard normal cumulative distribution function. Compute E[M(X)]\mathbb{E}[M(X)].

Short answer

1/21/2. Applying a continuous variable's own CDF to it gives a uniform on [0,1][0,1] (probability integral transform), whose mean is 12\tfrac12. Equivalently, M(X)=P(Y≤X∣X)M(X)=\mathbb{P}(Y\le X\mid X) for an independent copy YY, and P(Y≤X)=12\mathbb{P}(Y\le X)=\tfrac12 by symmetry.

Adapted from Joshi, Denson & Downes, Quant Job Interview Questions and Answers, Q3.38, p.84; question and answer rewritten by SelfMadeQuant.com.

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