Hi, With reference to question 20.5 from chapter 20 of the acted notes, what exactly does P[U(t)<0 for t=1 or 2] mean? Is it the probability of ruin by time 1 +(OR) the probability of ruin by time 2 ie 1-[P(U(1))<0) + P(U(2)<0|Not ruined in 1st year)*P(not ruined in 1st year)]? (Which dosesn't give same answer as the solution). Or does it mean the probability of ruin in second year given we survived the first year ie 1-[P(U(2)<0|Not ruined in 1st year)*P(not ruined in 1st year)] ie we must survive the first year, then the second year and then 1 minus the result to find the complimentary event? Thanks, Darragh
The second interpretation of ruin at time t=2 is correct; it's conditional on ruin not having already occurred at time t=1.
