Losses follow a distribution that is a mixture of two equally weighted Pareto distributions, one with parameters α = 2 and θ = 2000 and the other with parameters α = 2 and θ = 4000. An insurance coverage for these losses has an ordinary deductible of 1000. Calculate the expected payment per loss.
Added by Bradley R.
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5. - Pareto 1: \(\alpha = 2\), \(\theta = 2000\) - Pareto 2: \(\alpha = 2\), \(\theta = 4000\) - Deductible \(d = 1000\) (ordinary deductible) - Need to find the expected payment per loss, i.e., \(E[(X - d)^+]\). --- Show more…
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