Lecture05

Lecture05 - P2 using Excel Normdist Example • If...

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Lec 5: Risk Pooling in Insurance • If n policies, each has independent probability p of a claim, then the number of claims follows the binomial distribution. The standard deviation of the fraction of policies that result in a claim is • Probability that fraction of policies that result in loss will lie between P1 and
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Unformatted text preview: P2, using Excel Normdist Example • If probability of loss is .2, I write 100 policies, then expected number of losses is 20% and the standard deviation σ of the fraction of losses is (.2*0.8/100) .5 =.04 • Change n to 1000, get σ =.013 • Change n to 10000, get σ =.004...
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This note was uploaded on 02/08/2012 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

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Lecture05 - P2 using Excel Normdist Example • If...

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