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Problem 3. Risk 1 has a Pareto distribution with parameters o > 2 and 0. Risk 2 has a Pareto distribution with parameters 0.80 and
Problem 3. Risk 1 has a Pareto distribution with parameters o > 2 and 0. Risk 2 has a Pareto distribution with parameters 0.80 and d. Each risk is covered by a separate policy, each with an ordinary deductible of k. (1) Determine the expected cost per loss for risk 1. (2) Determine the limit as k goes to infinity of the ratio of the expected cost per loss for risk 2 to the expected cost per loss for risk 1
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