Stochastic models for risk control programs of organizations

Risk control programs of modern complex organizations make extensive use of stochastic models. The purpose of this paper is to consider a class of stochastic models in severity and risk duration reduction operations.

A new stochastic model is formulated which is shown to be of some importance in fundamental risk management operations. The investigation of such a model is based on classical methods of characteristic functions theory.

A stochastic model having the form of the product of two non‐negative and independent random variables is formulated. A characterization of the distribution of such a model is established. Moreover, applications of the proposed stochastic model in risk control programs of organizations are provided.

The difficulty of evaluating the corresponding distribution function, which extends the practical applicability of the proposed stochastic model still remains.

The formulated stochastic model consists of a strong analytical tool for investigating operations of risk control programs.