Hi,
I am struggling to interpret questions to understand whether portfolios are homogenous or in-homogenous. Question 2.25 relates to chapter 8, so I assume it is testing our ability to understand which is which?
Also my initial thoughts before seeing the answer to the question was to go to the formulas on page 16 of the tables to calculate the variance and try to use the formula for var(S). Presumably this was wrong as the question is not relating to the sum of IID RVs? Instead, could the formula on page 16 for conditional variance (i.e the var(Y)) formula be used?
On a separate note, is there an obvious way to spot that a question is an individual risk model question (Q 2.24 for example)? Do we just look out for the question saying that the number of claims from each risk are 0 or 1, the number of risks being specified and that the individual risks are independent? Or does the negative binomial distribution give it away?
Generally I have difficulty recognising which model to use from the wording of a question so any tips you could give me would be really appreciated.
Thanks!
Last edited by a moderator: Jul 28, 2018