Authors: Panagiotis T. Artikis
Addresses: Department of Strategy, Marketing and Enterprise, Lord Ashcroft International Business School, Anglia Ruskin University, East Road, Cambridge, Cambridgeshire CB1 1PT, UK
Abstract: Stochastic models are generally recognised as extremely powerful analytical tools for investigating fundamental concepts and operations of the risk management process. The present paper aims to consider stochastic modelling efforts related to effective reduction of the severity of risks causing multiple damages to a class of systems. A new stochastic model is formulated which is shown to be a classical problem of risk measurement operations. The investigation of such a model is based on classical methods of probability distributions theory. A stochastic model having the form of a random sum of non-negative random variables is formulated. Sufficient conditions for evaluating the characteristic function of the proposed random sum are established. Moreover, applications of this random sum in evaluating the severity of a risk threatening a class of systems are provided. The difficulty of establishing properties which extend the practical applicability of the proposed random sum still remains. The formulated stochastic model provides a new original way to measure catastrophic risks and overcome the existing classical risk measurement stochastic models.
Keywords: stochastic modelling; risk severity; systems; risk management; probability distribution; risk measurement.
International Journal of Applied Systemic Studies, 2014 Vol.5 No.3, pp.190 - 198
Available online: 31 Jul 2014 *Full-text access for editors Access for subscribers Purchase this article Comment on this article