Solution to the 2nd assignment

You can find a suggested solution to the 2nd assignment in the section "course material" or by clicking here.

Comments and recommendations: The Norwegian fire losses was apparently quite hard to fit. The Pareto distribution was not a good fit as you may have noticed. In my solution I also justify that the exponential is not a good fit either (the Pareto is too risk-averse, while the exponential is too risky). I also include the premium using the empirical distribution (some students did that as well, very good!) I also tried a generalized Pareto. This one is indeed better, but not optimal. You may try to do your own inference :) For the exam: the important part of the assignment for the exam are items: (a), (e), (f), (g) and (i). Also the challenge. See you next Friday!