Stochastic modelling of risk severity reduction operations

Abstract

Risk severity is generally recognized as the most important stochastic component of risk. Moreover, risk severity reduction operations constitute the most powerful tools of risk control. Stochastic models of such operations are particularly useful for the implementation of the risk management process. The present paper formulates a class of stochastic multiplicative models for describing efficient risk severity reduction operations.

Keywords and phrases:

• Stochastic modelling
• risk severity
• risk management