A financial contract pays a reward to the participants when losses are below a certain threshold, this is a particular t
Posted: Wed May 04, 2022 12:51 pm
A financial contract pays a reward to the participants when losses are below a certain threshold, this is a particular type of problem which Weishaus calls a “Bonus” problem. The bonus, dividend, or refund amount is expressed as a maximum between 0 and the refunded amount. For example, a 15% refund is paid on the difference between the $100 premium and the loss L where losses are distributed exponentially with parameter 𝜃 = $80. * Find the expected reward payment. [25 pts]
* What is the percentage of decrease on the company’s aggregate
loss, i.e. Loss Elimination Ratio, by this contract? [20 pts]
Good luck!
A financial contract pays a reward to the participants when losses are below a certain threshold, this is a particular type of problem which Weishaus calls a “Bonus” problem. The bonus, dividend, or refund amount is expressed as a maximum between 0 and the refunded amount. For example, a 15% refund is paid on the difference between the $100 premium and the loss L where losses are distributed exponentially with parameter 𝜃 = $80.
* Find the expected reward payment. [25 pts]
* What is the percentage of decrease on the company’s aggregate loss, i.e. Loss Elimination Ratio, by this contract? [20 pts]
Good luck!
A financial contract pays a reward to the participants when losses are below a certain threshold, this is a particular type of problem which Weishaus calls a “Bonus” problem. The bonus, dividend, or refund amount is expressed as a maximum between 0 and the refunded amount. For example, a 15% refund is paid on the difference between the $100 premium and the loss L where losses are distributed exponentially with parameter 𝜃 = $80.
* Find the expected reward payment. [25 pts]
* What is the percentage of decrease on the company’s aggregate loss, i.e. Loss Elimination Ratio, by this contract? [20 pts]
Good luck!