Part I. True or False: Place a T or an F, whichever you consider correct, in the

Question

Part I. True or False: Place a T or an F, whichever you consider correct, in the box before each numbered statement.

1. Subjective risk is the mental state of worry as to the outcome of a given event.
2. Objective risk is the variation between actual and expected losses.
3. Perceived risk is the risk estimated by the public.
4. Threat is the potential cause of system damage; usually exogenous to system of interest.
5. Security is the relative protection from adverse consequences usually associated with life and health.
6. Safety is a measure taken to guard against damage.
7. Utility theory is the mathematical tool that assigns the value, or utility, that a particular decision maker
attaches to a particular outcome.
8. Bounded rationality suggests that people make decisions that match situations.
9. Naturalistic decision making is prescriptive rather than descriptive.
10. Extreme events may imply that the events are rare.
11. When analyzing extreme events, we can look at the tails of the probability distributions.
12. In real life situations, tails of the distributions are thinner than what classical distributions predict.
13. Extreme value theory (EVT) deals with the study of the asymptotic behavior of only the largest extreme
observations (i.e. maxima) of a random variable and not of the smallest extreme observations.
14. Extremal type theorem identifies the possible classes of distributions of the extremes with respect to the
actual underlying distribution.
15. In the analysis of extremes, the tails have smaller variance than the rest of the data.
16. Risk can be measured by the probability and severity of adverse effects.
17. Increased reliability always results to reduced risk.
18. Risk should be identified only at the end of the systems development cycle.
19. Risk management cannot be performed under situations of uncertainty.
20. Reducing consequences is the only way to reduce risk.
21. Decision trees cannot be used in single-objective decision process.
22. Decision trees are not appropriate for sequential (i.e. multi-period) decision process.
23. Bounded rationality suggests that people’s cognitive processing capacity can perform the most complex
optimization tasks in their head.
24. Bayesian perspective of probability is that of a formal construct usually represented as a curve.
25. Cumulative distribution function assigns to each real value x the probability of X taking on values less than
or equal to x.
26. Evidence is carefully selected information that helps draw conclusions.
27. Mathematician’s perspective of probability is that it is the degree of confidence or certainty.
28. Statistical perspective of probability is that it is the frequency of outcome of repetitive experiments.
29. In the process of averaging out or calculating expected values, extreme and catastrophic but rare events
are emphasized.
30. Extreme value theory focuses primarily on analyzing the extreme observations rather than the
observations in the central region of the distribution.

Explanation / Answer

1.True

2.True

3.True

4.True

5.True

6.True

7.True

8.True

9.False

10.True

11.True

12.True

13.True

14.True

15.True

16.True

17.False

18.True

19.False

20.False

21.False

22.True

23.True

24.False

25.True

26.True

27.True

28.True

29.False

30.True

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