What have you do so far? How do you know the answer can't be 2? (it isn't 2 but how do you know that?)
I am quite honestly at an "absolute loss" with this one... I know the answer can't be 2 yet I keep getting it.. any help is much appreciated.
Question:
A reinsurer decides to use a continuous uniform distribution on the interval (0,θ) to model a claim size X. She wishes to estimate θ on the basis of a single observation X and using a decision function of the form d(X) = kX. If the loss incurred is proportional to the absolute value of the error, find the value of k which minimises the (expected) risk.
What have you do so far? How do you know the answer can't be 2? (it isn't 2 but how do you know that?)
I don't have emotions and sometimes that makes me very sad.
MathMaster135711 (12-03-2016)
MathMaster135711 (12-05-2016)
I thought it is just a calculus question once we know the definition of the loss functions etc. Providing the final answer for checking purpose only and requiring OP to fill up the entire calculation process.
Ok I admit that it will not be good for OP to copy if this is just a multiple choice question.
My guess is that they're missing the 1/k term at the end so they end up with (2/k - 1) as the multiplier which is why they keep coming up with k=2 for the answer.
I don't have emotions and sometimes that makes me very sad.
MathMaster135711 (12-03-2016)
Your first equality isn't true - you can't ignore the absolute value bars around the quantity. Like BGM said this one isn't too bad to do if you just integrate directly. You'll need to break the integral into two pieces to get rid of the absolute value (hint: break it up where KX = theta)
Last edited by Dason; 12-05-2016 at 04:36 PM.
I don't have emotions and sometimes that makes me very sad.
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