When do I take which distribution?

46 Pages Posted: 7 Dec 2021

See all articles by Uwe Wehrspohn

Uwe Wehrspohn

Wehrspohn GmbH & Co. KG; University of Wuerzburg

Dietmar Ernst

affiliation not provided to SSRN

Date Written: December 6, 2021

Abstract

For risk assessment and risk aggregation in enterprise risk management, describing the occurrence and impact of a risk through distributions is an important step.

We portray the distributions that are fundamental for enterprise risk management and describe when they can be used. These include the Bernoulli distribution, the binomial distribution, the Poisson distribution, the uniform distribution, the triangular distribution, the PERT distribution, the modified PERT distribution, the trapezoidal distribution, the custom distribution, the normal distribution, the lognormal distribution, the Weibull distribution and the compound distribution.

We show how the parameterisation of the distributions can be done via expert estimates or algorithmic calibration.

Keywords: Enterprise risk management, Bernoulli distribution, binomial distribution, Poisson distribution, uniform distribution, triangular distribution, PERT distribution, trapezoidal distribution, normal distribution, parameter calibration, expert estimation, Weibull distribution, modified PERT-distribution

JEL Classification: C01, C15,C87

Suggested Citation

Wehrspohn, Uwe and Ernst, Dietmar, When do I take which distribution? (December 6, 2021). Available at SSRN: https://ssrn.com/abstract=3979013 or http://dx.doi.org/10.2139/ssrn.3979013

Uwe Wehrspohn (Contact Author)

Wehrspohn GmbH & Co. KG ( email )

Nietzschestra├če 20
Mannheim, D-68165
Germany
+49 (0) 621 14626754 (Phone)

HOME PAGE: http://www.wehrspohn.info

University of Wuerzburg ( email )

Sanderring 2
Wuerzburg, Bavaria 97070
Germany
+49 (0)931 / 3184806 (Phone)
+49 (0)931 / 312 95 5 (Fax)

HOME PAGE: http://www.fzrm.uni-wuerzburg.de

Dietmar Ernst

affiliation not provided to SSRN

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