Question

The amount of claims is exponentially distributed with an average of ?. ? varies for each...

The amount of claims is exponentially distributed with an average of ?. ? varies for each policyholders and follow the Pareto distribution with parameters ? = 5 and ?. Variance from claim amount of 9.75. Calculate amount ?.

A. 4
B. 5
C. 6
D. 7
E. 8

Math   Statistics-And-Probability   
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Answer #1


So,
Also, since itself follows Pareto distribution with parameters ,


This implies that,
Putting and solving,
Now, we know that   
Given that , we get the following equation,

i.e. .


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