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Risk analysis and decision theory: A bridge

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

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.

Suggested Citation

  • Borgonovo, E. & Cappelli, V. & Maccheroni, F. & Marinacci, M., 2018. "Risk analysis and decision theory: A bridge," European Journal of Operational Research, Elsevier, vol. 264(1), pages 280-293.
    • Handle: RePEc:eee:ejores:v:264:y:2018:i:1:p:280-293
    DOI: 10.1016/j.ejor.2017.06.059
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