13. Consider an initial insurance portfolio of 20,000 independent automobile policies, each with a standard deviation of $300 and an expected loss of $400. Now suppose that this insurer also writes 1,000 independent fire insurance policies in order to diversify its line base. Each fire policy covers fairly large industrial risks, with an expected loss of $12,000 and a standard. deviation of $15,000. a) Calculate the expected value and standard deviation of average loss per policy for the entire insurance portfolio.
13. Consider an initial insurance portfolio of 20,000 independent automobile policies, each with a standard deviation of $300 and an expected loss of $400. Now suppose that this insurer also writes 1,000 independent fire insurance policies in order to diversify its line base. Each fire policy covers fairly large industrial risks, with an expected loss of $12,000 and a standard. deviation of $15,000. a) Calculate the expected value and standard deviation of average loss per policy for the entire insurance portfolio.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
Related questions
Question
Please help me
Transcribed Image Text:13. Consider an initial insurance portfolio of 20,000 independent antomobile policies, each with
a standard deviation of $300 and an expected loss of $400. Now suppose that this insurer also
writes 1,000 independent fire insurance policies in order to diversify its line base. Each fire
policy covers fairly large industrial risks, with an expected loss of $12,000 and a standard
deviation of $15,000.
a) Calculate the expected value and standard deviation of average loss per policy for the
entire insurance portfolio.
b) Calculate the ruin probability, assuming the firm estimates that its reserves and
surplus permit it to meet claims up to $21 million in total (i.e., $1,000 per policy).
c) Now assume that these policies are not independent; the correlation coefficient between
any two auto policies is 0.05, and the correlation coefficient between any two fire
policies is also 0.05; there is no correlation between auto and fire policies. Calculate a)
and b) again.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman