Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2013/iii/paper-28/4/b/ii/solution

The structural parameters remain , and , so the credibility factor after years is . Writing , the Bühlmann credibility estimate is
The target is . It is also the best affine predictor of the next year's count, because its extra conditional noise has zero covariance with past observations.

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