Hi all....
I keep finding this question in text books and whatnot but i cannot find a solution. And I would really like to find a solution....
Risk 1 has a Pareto distribution with parameters α (alpha) > 2 and θ. Risk 2 has a Pareto distribution with parameters 0.8α and θ. Each risk is covered by a separate policy each with an ordinary deductible of k. Determine the expected cost per loss of risk 1.
The problem i have with this question is: is there some assumption to be made, like the two risks make up the entire portfolio or something to be assumed about their weights? Is there something to assume so that we solve for the parameters then find an actual value for the expected cost?
Desperately searching for a solution to this question...........thank you :)
I keep finding this question in text books and whatnot but i cannot find a solution. And I would really like to find a solution....
Risk 1 has a Pareto distribution with parameters α (alpha) > 2 and θ. Risk 2 has a Pareto distribution with parameters 0.8α and θ. Each risk is covered by a separate policy each with an ordinary deductible of k. Determine the expected cost per loss of risk 1.
The problem i have with this question is: is there some assumption to be made, like the two risks make up the entire portfolio or something to be assumed about their weights? Is there something to assume so that we solve for the parameters then find an actual value for the expected cost?
Desperately searching for a solution to this question...........thank you :)
exam C sample question
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