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f888bet
Member
I'm trying to do Question X5.8 & am confused by part (i). I'm doing the assignment without answers & want to be put in the right direction.
My approach would be that I first need to calculate Beta, given I know the mean claim amount is £7,500. So if I have the pdf, then I need to calculate Beta such that 7,500 = integral (0 to infinity) of xf(x) dx.
Using integration by parts, I get Beta = 2500. This makes no sense, as every time you put this large number in the exponential term, it will always be zero. This means that it is impossible to get a claim that hits the retention!
Where am I going wrong?
My approach would be that I first need to calculate Beta, given I know the mean claim amount is £7,500. So if I have the pdf, then I need to calculate Beta such that 7,500 = integral (0 to infinity) of xf(x) dx.
Using integration by parts, I get Beta = 2500. This makes no sense, as every time you put this large number in the exponential term, it will always be zero. This means that it is impossible to get a claim that hits the retention!
Where am I going wrong?