Suppose that the possible values of S are non-negative integers. For a stop-loss contract with deductible d, the amount paid by the reinsurer to the...
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Question

Suppose that the possible values of S are non-negative integers. For a stop-loss contract

with deductible d,

the amount paid by the reinsurer to the ceding insurer is Id = (S -d)+


proof:

  • If d is an integer, then,

E[Id2]=E[Id-12]-2E[Id-1]+[1-Fs(d-1)] with E[I02 ] = E[S2]

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