ASM Section 15

[The Half]

In section 15 of ASM, Weishaus describes 3 ways to handle aggregate deductibles. The first of which is identical to the way deductibles are treated earlier on in the manual.

Namely, if you want to find expected losses in excess of the deductible, you can use the formula E[X] - E[X^d]. So for aggregate losses you just substitute S for X and get E[S] - E[S^d]. Then he explains 3 ways to calculate E[S^d].

The first of which I understand completely, you sum the value of S times the probabbilty of loss S all the way up to the deductible and then you add the deductible times the probability of the loss being greater than or equal to the deductible.

The second two methods I have no clue, and have read the examples and his expanation numerous times. Can anyone shed any light on these other two methods.

Thanks.

[Abraham Weishaus]

Personally I prefer the first method as well. You're not going to get too many questions on this topic anyway (maybe one), so just know one method well.

This is not meant to stop other students from posting a better explanation of the other methods, or from providing advice on how I could improve the exposition of the other two methods.

[Ballin]

I agree that the first one is easier to understand so I am going to disregard the other two....

Sorry, I am not any help; but if I were you, I would focus on the first one (especially since it is intuitive and memorization is not needed).