View Full Version : Exam5: Krakowski Exhibit 4

03-29-2004, 07:02 AM
Exhibit 4, Page 308 of text:

I would be grateful if someone can confirm/clear-up the following:

1) How the "Normalizied" column is calculated? I can see the author using lower-capping-limit:0.35 and upper:0.95 but where did he mention using these figures in his paper?

2) How "load" and "Ratio with Excess Load" is calculated?

3) Columns 1 to 4 (Scrambledstate->Ratio) are given and the rest are to be found? right?

Thanks for putting your time into it.

03-30-2004, 02:24 PM
Exhibit 4 corresponds to section 7 of the paper (p295-296)

1) In the first paragraph, he says "a high and low loss ratio is chosen (corresponding to percentiles previously decided on)"
He doesn't say this, but he has chosen 30% and 80% as his cutoffs.

Load = (Ratio - Normalized) * AIY
The point is that by capping the damage ratios (in the normalized column) our total losses will no longer be the sum of all the rows. So, he keeps track of how much of the losses are cut off by the normalization.

The sum of the losses cut off is 145,363,632
The AIY for the whole group is 1,291,380,146

The quotient of those two is 0.11, and that is added to the normalized damage ratio to get the ratio with excess load.

3) Yes.