• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Chapter 20 Acted Notes Q20.5

D

Darragh Kelly

Ton up Member
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.
 
You must log in or register to reply here.
Back
Top