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The
ompany
harges ea
h smoker a relative se
urity loading that is one and a half
times the relative se
urity loading
harged to ea
h nonsmoker. The
ompany wants the
total premium
olle
ted to ex
eed the 95th per
entile of the aggregate
laims distribution.
Determine the smallest relative se
urity loading for nonsmokers. (Use the fa
t that
P (Z 1:645) = :95 for a standard normal variable.) Give your answer as a per
entage.
(4) An insuran
e
ompany has a full
redibility standard of 1500
laims for the fre-
quen
y of a Poisson
laims pro
ess. The
redibility standard has a
onden
e interval
of 5%. Suppose the severity variable is uniform on the interval [20; 100℄. Find the
on-
den
e interval for pure premium of 2000
laims, using the same
onden
e level as in
the full
redibility standard for frequen
y.
(5) An auto insuran
e
ompany divides its
lients into two
lasses. It
lassies 30%
of its
lients as Class I and the remainder Class II. It models the
laim experien
e of its
lients by a
ompound Poisson
laims variable. For a Class I
lient the mean number
of annual
laims is 0:8. The severity is Gamma with parameters r = 3; = 2. For a
Class II
lient the mean number of annual
laims is 0:1. The severity is Gamma with
parameters r = 2; = 0:8.
Suppose a
lient has made total
laims of 2 in the last 5 years. Using Buhlmann
redi-
bility, estimate the
lient's
laim in the next year.
1
(6) Planes arrive at an airport at a Poisson rate of 12 per hour. You have just arrived
at the airport and been told that 18 planes arrived in the past hour.
(a) Find the probability that 5 planes will arrive in the next 20 minutes.
(b) Find the probability that 5 planes arrived in the last 20 minutes.
(7) A new
ar dealer is
ommen
ing business. The dealer has neither assets nor
liabilities. In ex
hange for
ontinuous payments at the rate of expe
ted sales, the
ar
dealer re
eives
ars on demand from the manufa
turer. Car sales o
ur in a
ordan
e
with a
ompound Poisson pro
ess at the rate of 12
ars per month. The pri
e of ea
h
ar
sold is either 20,000 or 30,000, with equal probability. The dealer is in a positive position
when
umulative sales ex
eed
umulative payments to the
ar manufa
turer.
Given that the dealer will attain a positive position,
al
ulate the
onditional expe
ted
value of the rst positive position.
(8) A nervous investor has gotten into the habit of moving his assets from dollars into
sterling and ba
k. If the assets are in sterling he waits an exponential time with a mean
of 10 days. He then tosses a
oin. If the
oin
omes down heads he transfers his assets
to dollars. Otherwise he lets his assets remain in sterling. If the assets are in dollars he
waits an exponential time with a mean of 20 days. He then tosses the same
oin. If the
oin
omes down heads he transfers his assets to sterling. Otherwise he lets his assets
remain in dollars. Suppose that today he has his assets in dollars. Find the probability
that his assets will be in sterling 15 days from now. Assume the probability of the
oin
oming down heads is 50%.