A survey of approaches for assessing and managing the risk of extremes

Vicki M. Bier, Yacov Y. Haimes, James H. Lambert, Nicholas C. Matalas, Rae Zimmerman

Research output: Contribution to journalArticle

Abstract

In this paper, we review methods for assessing and managing the risk of extreme events, where 'extreme events' are defined to be rare, severe, and outside the normal range of experience of the system in question. First, we discuss several systematic approaches for identifying possible extreme events. We then discuss some issues related to risk assessment of extreme events, including what type of output is needed (e.g., a single probability vs. a probability distribution), and alternatives to the probabilistic approach. Next, we present a number of probabilistic methods. These include: guidelines for eliciting informative probability distributions from experts; maximum entropy distributions; extreme value theory; other approaches for constructing prior distributions (such as reference or noninformative priors); the use of modeling and decomposition to estimate the probability (or distribution) of interest; and bounding methods. Finally, we briefly discuss several approaches for managing the risk of extreme events, and conclude with recommendations and directions for future research.

Original languageEnglish (US)
Pages (from-to)83-94
Number of pages12
JournalRisk Analysis
Volume19
Issue number1
DOIs
StatePublished - Feb 1999

Keywords

  • Extreme events
  • Extreme value theory
  • Judgmental distributions
  • Risk assessment
  • Risk management

ASJC Scopus subject areas

  • Safety, Risk, Reliability and Quality
  • Physiology (medical)

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