I'm using the Actuarial Brew solutions
For the sectond statement (i.e. (ii)) how do we determine Var[dZ(t)]?
I tried to attack it by “first principles”
Var[dZ(t)]=E[dZ(t)^2]-E[dZ(t)]^2=E[dt]- something…
SO that’s as far as I can get … what is expectation of dt? dt is a constant so it’s just dt, right?
Now how about E[dZ(t)] ? I tried creating an integral but all I got was
Z(infinity)-Z(-infinity)…
What next?
For the sectond statement (i.e. (ii)) how do we determine Var[dZ(t)]?
I tried to attack it by “first principles”
Var[dZ(t)]=E[dZ(t)^2]-E[dZ(t)]^2=E[dt]- something…
SO that’s as far as I can get … what is expectation of dt? dt is a constant so it’s just dt, right?
Now how about E[dZ(t)] ? I tried creating an integral but all I got was
Z(infinity)-Z(-infinity)…
What next?
SOA 76 Question 11
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