Consider the following statements made about EBCT Model 1. (a) e represents the 'true' risk premium...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the following statements made about EBCT Model 1. (a) e represents the 'true' risk premium for a given risk. (b) The variance of X; doesn't depend on 6. (c) None of the random variables or parameters in the model are assumed to have a normal distribution. Explain whether each of these statements is true or false. The table below shows the aggregate claim amounts (in £m) for an international insurer's fire portfolio for a 5-year period, together with some summary statistics. Country, 1 2 Country, 3 4 1 2 3 1 48 4 64 85 44 1 The volumes of business for each country for the insurer are as follows: Volume of business, Year j 3 5 13 10 30 12 20 5 Aggregate claim amount, Year j 2 3 4 53 42 50 71 64 73 76 65 69 55 22 54 52 2 15 14 8 35 22 6 30 4 16 15 12 5 59 16 70 90 71 4 10 Calculate the credibility premium for each country in Year 6 using EBCT Model 2. 6 2292 20 25 10 12 An actuary has, for three years, recorded the volume of unsolicited advertising that he receives. He believes that the number of items that he receives follows a Poisson distribution with a mean which varies according to which quarter of the year it is. He has recorded Y, the number of items received in the i th quarter of the j th year (i=1,2,3,4 and j=1,2,3). The actuary wishes to estimate the number of items that he will receive in the first quarter of year four. He has recorded the following data: (i) i=1 i=2 i=3 i=4 (iv) Y₁1 98 82 75 132 Y/2 117 102 83 152 Y₁3 124 95 88 148 *-ΣΥΣ(4) 1 113 93 82 144 362 206 86 224 Estimate Y₁,4 the number of items that the actuary expects to receive in the first quarter of year four using the assumptions of EBCT Model 1. [5] The actuary believes that, in fact, the volume of items has been increasing at the rate of 10% per annum. (ii) Suggest how the approach in (i) can be adjusted to produce a revised estimate taking this growth into account. [2] Calculate the maximum likelihood estimate of Y₁,4 (based on the quarter one data already observed and the 10% pa increase described above). [5] Compare the assumptions underlying the approach in (i) and (ii) with those underlying the approach in (iii). [2] [Total 14] Consider the following statements made about EBCT Model 1. (a) e represents the 'true' risk premium for a given risk. (b) The variance of X; doesn't depend on 6. (c) None of the random variables or parameters in the model are assumed to have a normal distribution. Explain whether each of these statements is true or false. The table below shows the aggregate claim amounts (in £m) for an international insurer's fire portfolio for a 5-year period, together with some summary statistics. Country, 1 2 Country, 3 4 1 2 3 1 48 4 64 85 44 1 The volumes of business for each country for the insurer are as follows: Volume of business, Year j 3 5 13 10 30 12 20 5 Aggregate claim amount, Year j 2 3 4 53 42 50 71 64 73 76 65 69 55 22 54 52 2 15 14 8 35 22 6 30 4 16 15 12 5 59 16 70 90 71 4 10 Calculate the credibility premium for each country in Year 6 using EBCT Model 2. 6 2292 20 25 10 12 An actuary has, for three years, recorded the volume of unsolicited advertising that he receives. He believes that the number of items that he receives follows a Poisson distribution with a mean which varies according to which quarter of the year it is. He has recorded Y, the number of items received in the i th quarter of the j th year (i=1,2,3,4 and j=1,2,3). The actuary wishes to estimate the number of items that he will receive in the first quarter of year four. He has recorded the following data: (i) i=1 i=2 i=3 i=4 (iv) Y₁1 98 82 75 132 Y/2 117 102 83 152 Y₁3 124 95 88 148 *-ΣΥΣ(4) 1 113 93 82 144 362 206 86 224 Estimate Y₁,4 the number of items that the actuary expects to receive in the first quarter of year four using the assumptions of EBCT Model 1. [5] The actuary believes that, in fact, the volume of items has been increasing at the rate of 10% per annum. (ii) Suggest how the approach in (i) can be adjusted to produce a revised estimate taking this growth into account. [2] Calculate the maximum likelihood estimate of Y₁,4 (based on the quarter one data already observed and the 10% pa increase described above). [5] Compare the assumptions underlying the approach in (i) and (ii) with those underlying the approach in (iii). [2] [Total 14]
Expert Answer:
Answer rating: 100% (QA)
Lets go through each statement and determine whether it is true or false a represents the true risk premium for a given risk This statement is unclear ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these accounting questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
A researcher wanted to find out if there was difference between older movie goers and younger movie goers with respect to their estimates of a successful actors income. The researcher first...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-4. Ivan and Irene paid the following in 2012 (all by check or can otherwise be...
-
The formula F(x) = 3x + C gives a different function for each value of C. All of these functions, however, have the same derivative with respect to x, namely F(x) = 3. Are these the only...
-
A purchasing agent for Franklin Office Supplies receives the goods that he purchases and also approves payment for the goods. Requirements 1. How could this purchasing agent cheat his company? 2. How...
-
Was Elon Musk showing yet again that he is an innovator par excellence, shaking up the old school auto industry, or is this a foolish decision meant to capitalize quickly on the many deposits that...
-
Define the following : (a) Indicated power (b) Brake power (c) Mechanical efficiency (d) Indicated and brake thermal efficiency (e) Relative efficiency
-
We might expect credit card purchases to differ from cash purchases at the same store. Table P-15 contains daily gross sales and items sold for cash purchases and daily gross sales and items sold for...
-
Discuss the effect of fiscal policy on inflation. Discuss the effect of persistent fiscal stimulus on the economy in the long run. Describe the mechanism of how changes in fiscal policy affect output...
-
A month has elapsed since Precision Computer Centre's year-end. Tony Freedman will use four specialized journals for recording business transactions in the month of September. To assist you in...
-
Accounting Rate of Return Vanderhoort Company invested $9,960,000 in a new product line. The life cycle of the product is projected to be seven years with the following net income stream: $360,000,...
-
(b) (7 points) For a given input array A: < 1, 2, 5, 3, 4, 7, 6, 9, 8 >, what is the sequence of numbers in A after calling Build-Max-Heap(A)? Please show the intermediate trees. Algorithm 2...
-
a) Given the following MATLAB code, determine the final values of x and y. (5 marks) x=3--2 <2^2==6 y - 3:3:14 b) Given that a [1 2 3] and b code; [312], evaluate the following MATLAB a. "b-a (5...
-
A container with volume 1.71 L is initially evacuated. Then it is filled with 0.246 g of N2. Assume that the pressure of the gas is low enough for the gas to obey the ideal-gas law to a high degree...
-
Suppose a giant human grows each year a random amount whose average is 49cm and whose standard deviation is 30cm. If the amount grown each year is independent of every other year, what's the...
-
Sandhill Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $489,000, variable expenses of $367,000, and fixed expenses of $142,000....
-
Given the following argument: Premise: If you vote, then you are registered to vote. Premise: Malika is registered to vote. Conclusion: Malika voted. a. Identify the form of the argument (affirming...
-
What types of questions can be answered by analyzing financial statements?
-
David and Darlene Jasper have one child, Sam, who is 6 years old. The Jaspers reside at 4639 Honeysuckle Lane, Los Angeles, CA 90248. David's Social Security number is 577-11-3311, Darlene's is...
-
Your supervisor has asked you to research the following situation concerning Owen and Lisa Cordoncillo. Owen and Lisa are brother and sister. In May 2012, Owen and Lisa exchange business pickup...
-
Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Circle Drive, Houston, TX 77001. Her employer identification number is 95- 1234321 and her Social Security number is...
-
The number on the jersey of each New York Giants football player is recorded, then the mean of those numbers is computed. Decide whether the statement makes sense (or is clearly true) or does not...
-
A professor calculates final grades using a weighted mean in which the final exam counts twice as much as the midterm. Decide whether the statement makes sense (or is clearly true) or does not make...
-
The following ages (years) of survey respondents: 22, 19, 21, 27, over 65, over 80. State whether the mean or median would give a better description of the average. Explain your reasoning.
Study smarter with the SolutionInn App