April 2022 Question 2

Discussion in 'SP8' started by o.menary11, Mar 18, 2024.

  1. o.menary11

    o.menary11 Active Member

    Hi,

    In the solution, why does φ=E[σ^2(θ)] = E[Var(N|θ)] ?

    Thanks!
     
  2. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    From page 38 of Chapter 18 we know that φ=E[σ^2(θ)]=Vik multipled by var (Xik|θi).

    But we are working with a claim number distribution N rather than claim sizes X. So we can simply swap X for N and ignore the volume factor.
     
    o.menary11 likes this.

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