Missing something stupid here, and probably superflous but:
Cov (XiBi, XiBi) =? Var (XiBi) =
Var(Bi)*E(Xi)^2 + Var(Xi) * E[Bi)^2 =
b * E(Xi)^2 + Var(Xi) * (1)^2 = b * E[Xi)^2 + Var(Xi)
IAA has this as:
b * E[Xi)^2 + Var(Xi) * (1+b)
where does the 1+b come from?
Thanks!
Cov (XiBi, XiBi) =? Var (XiBi) =
Var(Bi)*E(Xi)^2 + Var(Xi) * E[Bi)^2 =
b * E(Xi)^2 + Var(Xi) * (1)^2 = b * E[Xi)^2 + Var(Xi)
IAA has this as:
b * E[Xi)^2 + Var(Xi) * (1+b)
where does the 1+b come from?
Thanks!
IAA loss model question
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