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Risk of Extreme Events in Multiobjective Decision Trees Part 1. Severe Events
Author(s) -
Frohwein Hendrik I.,
Lambert James H.
Publication year - 2000
Publication title -
risk analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.972
H-Index - 130
eISSN - 1539-6924
pISSN - 0272-4332
DOI - 10.1111/0272-4332.00011
Subject(s) - decision tree , computer science , environmental science , forensic engineering , risk analysis (engineering) , engineering , business , data mining
Earlier work with decision trees identified nonseparability as an obstacle to minimizing the conditional expected value, a measure of the risk of extreme events, by the well‐known method of averaging out and folding back. This first of two companion papers addresses the conditional expected value that is defined as the expected outcome assuming the exceedance of a threshold β, where β is preselected by the decision maker. An approach is proposed to overcome the need to evaluate all policies in order to identify the optimal policy. The approach is based on the insight that the conditional expected value is separable into two constituent elements of risk and can thus be optimized along with other objectives, including the unconditional expected value of the outcome, by using a multiobjective decision tree. An example of sequential decision making for improving highway capacity is given.