[ASM, ed11] Coverage Modification Formula

[JasonYeung]

Hi all!
I am using ASM manual (edition 11) and here's the question...
I am interested in the formula (13.1)
1-(p_0)^(M*)=(1-p_0)^(M) x (1-p_0)^(*)/(1-p_0)
How do we derive this formula actually...?
seems like textbook does not give us this formula actually...
Thank you in advanced!

[JasonYeung]

wow 39 views and no reply...is the question too stupid or what...?

[Gandalf]

Symbols are hard to follow. Why don't you create an example for yourself, in words. E.g., "Claims are uniform on {0,50,100,200,300}. There's a deductible of 50 or 100." Do the formulas work? Can you see why it works?

Then try "Claims are Poisson with mean 3. There's a deductible of 1 or 2". Do the formulas work? Can you see why it works?

Examples might not fit exactly; I'm not even sure whether it's a formula for the number of claims or the amount of claims. Whatever it's for, make yourself an example, decide if the formula works for the example, decide why.

If you think the formula doesn't work for the example, post your example and how you tried to apply the formula to it.

[JasonYeung]

Symbols are hard to follow. Why don't you create an example for yourself, in words. E.g., "Claims are uniform on {0,50,100,200,300}. There's a deductible of 50 or 100." Do the formulas work? Can you see why it works?

Then try "Claims are Poisson with mean 3. There's a deductible of 1 or 2". Do the formulas work? Can you see why it works?

Examples might not fit exactly; I'm not even sure whether it's a formula for the number of claims or the amount of claims. Whatever it's for, make yourself an example, decide if the formula works for the example, decide why.

If you think the formula doesn't work for the example, post your example and how you tried to apply the formula to it.

Thanks a lot!! :tup:
I will follow your suggestions~let me see if I can try it out! :toast:

[newts]

I agree with Gandalf that your symbols are hard to follow. Instead of setting the equation up the way you have it, set it up as a proportion. It made more sense to me that way.