Tag Archives: Moment Generating Function

Exam C Practice Problem 14 – Examples of Limited Fluctuation Credibility

Problem 14-A

You are given the following:

  • The annual number of claims generated from a portfolio of insurance policies follows a Poisson distribution.
  • The claim size follows a uniform distribution on (0,t) where t is unknown.
  • The number of claims and the claim sizes are independent.

Using limited fluctuation credibility, how many expected claims are required to be 95% certain that actual claim costs will be within 5% of the expected claim costs?

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      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1443

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1579

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1936

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1945

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 2050

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Problem 14-B

You are given the following:

  • The annual number of claims generated from a portfolio of insurance policies follows a Poisson distribution.
  • The claim size follows a distribution with the following moment generating function.
    • \displaystyle M(t)=\frac{1}{(1-10t)^4}
  • The number of claims and the claim sizes are independent.

What is the least number of expected claims that are required to be 90% certain that actual claim costs will be within 5% of the expected claim costs?

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      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 820

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1230

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1353

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1376

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 1396

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\copyright \ 2013 \ \ \text{Dan Ma}

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Exam C Practice Problem 6 – Working with Posterior Distributions

Problem 6-A

You are given the following:

    • The number of claims in a calendar year for a given risk follows a Poisson distribution with mean \theta.
    • The prior distribution of \theta has the Gamma distribution with mean 2 and variance 1.

After observing this risk for five calendar years, a total of 12 claims are observed.

Which of the following is the moment generating function of the posterior distribution of \theta?

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      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ M(t)=\biggl(\frac{2}{2-t}\biggr)^{16} \ \ \ \ \ \ \ \ t<2

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ M(t)=\biggl(\frac{7}{7-t}\biggr)^{15} \ \ \ \ \ \ \ \ t<7

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ M(t)=\biggl(\frac{14}{14-t}\biggr)^{9} \ \ \ \ \ \ \ \ t<14

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ M(t)=\biggl(\frac{7}{7-t}\biggr)^{15} \ \ \ \ \ \ \ \ t<2

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ M(t)=\biggl(\frac{7}{7-t}\biggr)^{16} \ \ \ \ \ \ \ \ t<7

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Problem 6-B

You are given the following:

    • The number of claims in a calendar year for a given risk follows a Poisson distribution with mean \theta.
    • The prior distribution of \theta has the Gamma distribution with mean 4 and variance \frac{1}{2}.

After observing this risk for eight calendar years, a total of 32 claims are observed.

Determine the coefficient of variation of the posterior distribution of \theta.

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      \displaystyle (A) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \frac{1}{64}

      \displaystyle (B) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \frac{1}{32}

      \displaystyle (C) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \frac{1}{16}

      \displaystyle (D) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \frac{1}{8}

      \displaystyle (E) \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \frac{1}{4}

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\copyright \ 2013 \ \ \text{Dan Ma}