

FlashChat  Actuarial Discussion  Preliminary Exams  CAS/SOA Exams  Cyberchat  Around the World  Suggestions 

ShortTerm Actuarial Math Old Exam C Forum 

Thread Tools  Search this Thread  Display Modes 
#1




Limited Expected Value Problem
Hello,
I'm working on a Limited Expected value problem [x ^ 10,000] for the Single Parameter Pareto distribution with alpha = 1 and theta = 1000. Since the tables are not helpful, the solution works it using first principles by integrating the Survival function. The solution splits the integral into two pieces  a value of 1000 + the integration of the survival function from 1000 to 10000. The solution states that the integral from zero to 1000 equals 1000. What principle is being used to determine that the first piece of the integral equals 1000? Sorry if I'm missing something obvious. Thank you,
__________________
EXAMS: VEE: FAP: 
#2




I think I just figured it out  are they using the expected mean formula?
__________________
EXAMS: VEE: FAP: 
#4




Gandalf  thank you for the quick reply!
Correct  it is not a difficult integration. However, ln(0) is undefined.
__________________
EXAMS: VEE: FAP: 
#6




Gandalf  Thank you.
OK. I'm dense. How is it 1 below 1000?
__________________
EXAMS: VEE: FAP: 
#7




The published tables give you the survival function S or cumulative distribution function F for x>=theta, I forget which. Below that, you need the (universal) definition of a survival function: S(x) = Pr(X>x). From the tables, you can conclude S(theta)=1 (directly, or by 1F(theta), if that´s what they give you.)
If S(theta) is 1, then S must be a constant 1 below theta, since S is a non increasing function and probabilities can’t exceed 1. 
#8




AAAaaahhhhh. Right. I forgot about that stipulation of x>theta  which makes sense.
Thank you bunch!!!
__________________
EXAMS: VEE: FAP: 
Thread Tools  Search this Thread 
Display Modes  

