The report begins by outlining several case studies with varying levels of data, examining the role for extreme event risk analysis. The case studies include BA’s analysis of fire blight and New Zealand apples, bank operational risk and several technical failures. The report then surveys recent developments in methods relevant to evaluating extreme risks and evaluates their properties. These include methods for fraud detection in banks, formal extreme value theory, Bayesian approaches, qualitative reasoning, and adversary and advocacy models. The document (...) includes a supplementary report as an appendix, providing an overview of the quantification of bank operational risks. (shrink)

Logical argument forms are investigated by second order probability density functions. When the premises are expressed by beta distributions, the conclusions usually are mixtures of beta distributions. If the shape parameters of the distributions are assumed to be additive (natural sampling), then the lower and upper bounds of the mixing distributions (P´olya-Eggenberger distributions) are parallel to the corresponding lower and upper probabilities in conditional probability logic.