Distorted Risk Measures with Application to Military Capability Shortfalls
Journal article Jan-Jun 2005
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH
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We consider the problem of selecting a appropriate distortion function and associated parameters to account for rare but catastrophic events that may result from a shortfall of military or security capabilities. Additionally, we describe the means by which a decision maker may allocate resources, subject to a finite budget constraint, while considering the impact of the risk of such shortfalls. The optimal decision is shown to be sensitive to the decision makers level of risk aversion.
- Administration and Management
- Operations Research