… are available at http://fin4335.garven.com/spring2020/Insurance%20Economics%20Class%20Problem%20Solutions.pdf.

# Category Archives: Problem Set Solutions

# Solutions for Problem Set 4…

… are available at http://fin4335.garven.com/spring2020/ps4solutions.pdf.

# Broader Risk Definitions Class Problem and Solutions…

Last Thursday’s “Broader Risk Definitions” Class Problem is available here; the solutions are available here.

# Solutions for Problem Set 3…

… are available at http://fin4335.garven.com/spring2020/ps3solutions.pdf.

# Risk Aversion Class Problem and Solutions…

Today’s risk aversion class problem is available here; the solutions are available here.

# Synopsis of Thursday’s Investment Example

I recommend reading the synopsis of Thursday’s Investment Example which we covered at the end of class that day – it will provide you with much clarity!

# Risk Pooling Class Problem and Solution

PDF’s of today’s class problem and solutions are available here:

Note also that the probability of a loss exceeding $1,500 when *n *=1 (i.e., when there is no risk pooling) is:

.

This problem showcases the tremendous advantage afforded to consumers from the pooling of risk, by reducing the probability of a large loss by almost 60% when risks are *iid *and *n *=5 (question 1), and by reducing the probability of a large loss by more than 80% when risks are *iid *and *n *=10 (question 2). However, the introduction of positive correlation in question 3 significantly reduces the efficacy of risk pooling, since for *n *=10 and , there is a 12.57% probability that the loss on an average policy will exceed $1,500.

# Solutions for Problem Set 2…

… are available at http://fin4335.garven.com/spring2020/ps2solutions.pdf.

# Statistics class problem handout, statistics class problem solution, and statistics class problem spreadsheet model…

# Solutions for Problem Set 1…

… are available at http://fin4335.garven.com/spring2020/ps1solutions.pdf.