Question

In a continuous-time surplus model, the claim severity is distributed as BN(2, 0.4). Determine the Lundberg upper bound for the probability of ultimate ruin if the initial surplus is 2 and the prin a continuous-time surplus model, the claim severity is distributed as BN(2, 0.4). Determine the Lundberg upper bound for the probability of ultimate ruin if the initial surplus is 2 and the premium loading factor is 0.25.emium loading factor is 0.25.

Answer 1

The Lundberg upper bound for the probability of ultimate ruin in a continuous-time surplus model can be calculated using the formula: Lundberg upper bound = (initial surplus) / (premium loading factor).

Step-by-step explanation:

In a continuous-time surplus model, the Lundberg upper bound for the probability of ultimate ruin can be calculated using the formula:

Lundberg upper bound = (initial surplus) / (premium loading factor)

In this case, the initial surplus is 2 and the premium loading factor is 0.25. Therefore, the Lundberg upper bound for the probability of ultimate ruin is:

Lundberg upper bound = 2 / 0.25 = 8