Discrete time risk model and probability of ruin. Please give final answer for Both!! dont ask me to calculate! 2. Let P(Z = 0) = p, P(Z = 1) = q, P(Z = 3) = r, where positive p, q, r satisfy p + q + r = 1 and E[Z] <1.(a) find the recursion formula for ₁ (u), u = 0, 1, 2, . . .Take p 3/8, q = 1/2, r = 1/8(b) find the smallest initial capital u for which the chance of ultimate ruin is less than 5%.

(a) We have to find the recursion formula. (b) We have to find the smallest initial capital u for…

Answered: 2. Let P(Z = 0) = p, P(Z = 1) = q, P(Z…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

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2. Let P(Z = 0) = p, P(Z = 1) = q, P(Z = 3) =r, where positive p, q, r satisfy p+q+r= 1 and E[Z] < 1. (a) find the recursion formula for a (u), u = 0, 1, 2, ... Take p 3/8, q = 1/2, r = 1/8 (b) find the smallest initial capital u for which the chance of ultimate ruin is less than 5%.