Question

11. Losses from 2015 follow a Pareto distribution with parameters ? = 2 and ? = 2,000. 1) Calculate the loss elimination ratio for an ordinary deductible of $1,000. 2) There was 5% inflation from 2015 to 2016. What is the expected payment per payment in 2016 for no deductible and a maximum covered loss of $10,000?

          11. Losses from 2015 follow a Pareto distribution with parameters ? = 2 and ? = 2,000.
1) Calculate the loss elimination ratio for an ordinary deductible of $1,000.
2) There was 5% inflation from 2015 to 2016. What is the expected payment per payment in 2016 for no deductible and a maximum covered loss of $10,000?

11. Losses from 2015 follow a Pareto distribution with parameters ? = 2 and ? = 2,000.
1) Calculate the loss elimination ratio for an ordinary deductible of 1,000.
2) There was 5% inflation from 2015 to 2016. What is the expected payment per payment in 2016 for no deductible and a maximum covered loss of $10,000?

Added by Melanie C.

Elementary Statistics a Step by Step Approach

Allan G. Bluman 9th Edition

Instant Answer

Solved by Expert Shaiju T

06/16/2022

Step 1

The formula is 1 - (θ / (θ + d))^α, where θ is the scale parameter, d is the deductible, and α is the shape parameter. Plugging in the given values, we get 1 - (2000 / (2000 + 1000))^2 = 1 - (2/3)^2 = 1 - 4/9 = 5/9 = 0.5556. So, the loss elimination ratio is Show more…

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Losses from 2015 follow a Pareto distribution with parameters Î± = 2 and Î¸ = 2,000. 1) Calculate the loss elimination ratio for an ordinary deductible of $1,000. 2) There was 5% inflation from 2015 to 2016. What is the expected payment per payment in 2016 for no deductible and a maximum covered loss of $10,000?