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Decision Making for Group Risk Reduction: Dealing with Epistemic Uncertainty
In: Risk analysis: an international journal, Band 33, Heft 10, S. 1884-1898
ISSN: 1539-6924
Group risk is usually represented by FN curves showing the frequency of different accident sizes for a given activity. Many governments regulate group risk through FN criterion lines, which define the tolerable location of an FN curve. However, to compare different risk reduction alternatives, one must be able to rank FN curves. The two main problems in doing this are that the FN curve contains multiple frequencies, and that there are usually large epistemic uncertainties about the curve. Since the mid 1970s, a number of authors have used the concept of "disutility" to summarize FN curves in which a family of disutility functions was defined with a single parameter controlling the degree of "risk aversion." Here, we show it to be risk neutral, disaster averse, and insensitive to epistemic uncertainty on accident frequencies. A new approach is outlined that has a number of attractive properties. The formulation allows us to distinguish between risk aversion and disaster aversion, two concepts that have been confused in the literature until now. A two‐parameter family of disutilities generalizing the previous approach is defined, where one parameter controls risk aversion and the other disaster aversion. The family is sensitive to epistemic uncertainties. Such disutilities may, for example, be used to compare the impact of system design changes on group risks, or might form the basis for valuing reductions in group risk in a cost‐benefit analysis.
Modeling Epistemic Uncertainty in Offshore Wind Farm Production Capacity to Reduce Risk
In: Risk analysis: an international journal, Band 42, Heft 7, S. 1524-1540
ISSN: 1539-6924
AbstractFinancial stakeholders in offshore wind farm projects require predictions of energy production capacity to better manage the risk associated with investment decisions prior to construction. Predictions for early operating life are particularly important due to the dual effects of cash flow discounting and the anticipated performance growth due to experiential learning. We develop a general marked point process model for the times to failure and restoration events of farm subassemblies to capture key uncertainties affecting performance. Sources of epistemic uncertainty are identified in design and manufacturing effectiveness. The model then captures the temporal effects of epistemic and aleatory uncertainties across subassemblies to predict the farm availability‐informed relative capacity (maximum generating capacity given the technical state of the equipment). This performance measure enables technical performance uncertainties to be linked to the cost of energy generation. The general modeling approach is contextualized and illustrated for a prospective offshore wind farm. The production capacity uncertainties can be decomposed to assess the contribution of epistemic uncertainty allowing the value of gathering information to reduce risk to be examined.
Sequential Refined Partitioning for Probabilistic Dependence Assessment
In: Risk analysis: an international journal, Band 38, Heft 12, S. 2683-2702
ISSN: 1539-6924
AbstractModeling dependence probabilistically is crucial for many applications in risk assessment and decision making under uncertainty. Neglecting dependence between multivariate uncertainties can distort model output and prevent a proper understanding of the overall risk. Whenever relevant data for quantifying and modeling dependence between uncertain variables are lacking, expert judgment might be sought to assess a joint distribution. Key challenges for the use of expert judgment for dependence modeling are over‐ and underspecification. An expert can provide assessments that are infeasible, i.e., not consistent with any probability distribution (overspecification), and on the other hand, without making very restrictive parametric assumptions an expert cannot fully define a probability distribution (underspecification). The sequential refined partitioning method addresses over‐ and underspecification while allowing for flexibility about which part of a joint distribution is assessed and its level of detail. Potential overspecification is avoided by ensuring low cognitive complexity for experts through eliciting single conditioning sets and by offering feasible assessment ranges. The feasible range of any (sequential) assessment can be derived by solving a linear programming problem. Underspecification is addressed by modeling the density of directly and indirectly assessed distribution parts as minimally informative given their constraints. Hence, our method allows for modeling the whole distribution feasibly and in accordance with experts' information. A nonparametric way of assessing and modeling dependence flexibly in such detail has not been presented in the expert judgment literature for probabilistic dependence models so far. We provide an example of assessing terrorism risk in insurance underwriting.
Editorial: Operational Research – Making an Impact
In: Belton , V , Bedford , T & Pisinger , D 2018 , ' Editorial: Operational Research – Making an Impact ' , European Journal of Operational Research , vol. 264 , no. 3 , pp. 797-798 . https://doi.org/10.1016/j.ejor.2017.09.001
The origins of Operational Research are well known. OR developed – in particular in the UK - in the early 1940s as an area in which science was applied and new research inspired by real-world challenges, primarily in military analysis and in industrial production. As OR developed, a community of academic OR scholars became established alongside OR practitioners and this has led quite naturally to the situation that, over time, much of the OR academic literature is inspired by theoretical development rather than by immediate application.
BASE
Supporting Reliability Decisions During Defense Procurement Using a Bayes Linear Methodology
In: IEEE transactions on engineering management: EM ; a publication of the IEEE Engineering Management Society, Band 58, Heft 4, S. 662-673
Supporting ALARP decision making by cost benefit analysis and multiattribute utility theory
In: Journal of risk research: the official journal of the Society for Risk Analysis Europe and the Society for Risk Analysis Japan, Band 8, Heft 3, S. 207-223
ISSN: 1466-4461
Approximate Uncertainty Modeling in Risk Analysis with Vine Copulas
In: Risk analysis: an international journal, Band 36, Heft 4, S. 792-815
ISSN: 1539-6924
Many applications of risk analysis require us to jointly model multiple uncertain quantities. Bayesian networks and copulas are two common approaches to modeling joint uncertainties with probability distributions. This article focuses on new methodologies for copulas by developing work of Cooke, Bedford, Kurowica, and others on vines as a way of constructing higher dimensional distributions that do not suffer from some of the restrictions of alternatives such as the multivariate Gaussian copula. The article provides a fundamental approximation result, demonstrating that we can approximate any density as closely as we like using vines. It further operationalizes this result by showing how minimum information copulas can be used to provide parametric classes of copulas that have such good levels of approximation. We extend previous approaches using vines by considering nonconstant conditional dependencies, which are particularly relevant in financial risk modeling. We discuss how such models may be quantified, in terms of expert judgment or by fitting data, and illustrate the approach by modeling two financial data sets.
Expert quantification of uncertainties in a risk analysis for an infrastructure project
In: Journal of risk research: the official journal of the Society for Risk Analysis Europe and the Society for Risk Analysis Japan, Band 8, Heft 1, S. 3-17
ISSN: 1466-4461
A Bayes Linear Bayes Method for Estimation of Correlated Event Rates
In: Risk analysis: an international journal, Band 33, Heft 12, S. 2209-2224
ISSN: 1539-6924
Typically, full Bayesian estimation of correlated event rates can be computationally challenging since estimators are intractable. When estimation of event rates represents one activity within a larger modeling process, there is an incentive to develop more efficient inference than provided by a full Bayesian model. We develop a new subjective inference method for correlated event rates based on a Bayes linear Bayes model under the assumption that events are generated from a homogeneous Poisson process. To reduce the elicitation burden we introduce homogenization factors to the model and, as an alternative to a subjective prior, an empirical method using the method of moments is developed. Inference under the new method is compared against estimates obtained under a full Bayesian model, which takes a multivariate gamma prior, where the predictive and posterior distributions are derived in terms of well‐known functions. The mathematical properties of both models are presented. A simulation study shows that the Bayes linear Bayes inference method and the full Bayesian model provide equally reliable estimates. An illustrative example, motivated by a problem of estimating correlated event rates across different users in a simple supply chain, shows how ignoring the correlation leads to biased estimation of event rates.