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Old 12-21-2011, 01:16 PM
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Ionic Order Ionic Order is offline
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Default Question about compound variance (aggregate loss models)
ASM section 14.2 (11th edition) shows the derivation of the compound variance formula from the conditional variance formula. I understand all of the steps, except this one:

only if X is independent of N, where N is the number of claims and X is the size of each claim

I think I'm missing a very fundamental rule in probability here, but I can't remember which one is it. Any ideas?
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