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Risk analysis and decision theory: A bridge

E. Borgonovo, V. Cappelli, F. Maccheroni and M. Marinacci

European Journal of Operational Research, 2018, vol. 264, issue 1, 280-293

Abstract: The risk-triplet approach pioneered by Kaplan and Garrick is the keystone of operational risk analysis. We perform a sharp embedding of the elements of this framework into the one of formal decision theory, which is mainly concerned with the methodological and modeling issues of decision making. The aim of this exercise is twofold: on the one hand, it gives operational risk analysis a direct access to the rich toolbox that decision theory has developed, in the last decades, in order to deal with complex layers of uncertainty; on the other, it exposes decision theory to the challenges of operational risk analysis, thus providing it with broader scope and new stimuli.

Keywords: Decision analysis; Risk analysis; Decision theory; Epistemic uncertainty (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:ejores:v:264:y:2018:i:1:p:280-293