An alternative formulation
Wednesday, March 17, 2010
2:56 PM
An alternative formulation
Incidents arrive at a Poisson rate λ.
Each incident has an average cost C. 
→ Exposure in interval ∆T = λ*∆T*C.
Why it is equivalent: the Poisson postulates 
Prob(1 event in ∆T) = λ∆T (for ∆T small enough)