How Risky is that Risk? Measuring Likelihood of Risks

Many risks are well documented in academic and trade publications, even though attempts to estimate the likelihood of such risks have not received much attention. Quantitative measures of risk, even approximate measures, can help consumers take rational decisions, help security professionals prioritize their countermeasures, and enable ecommerce by helping insurers price risks accurately. In this research, we survey research from reference disciplines and suggest several research methods that could help approximate the magnitude of risks. These are: a) psychometric methods, b) lotteries with induced values (BDM Procedure), and c) using prediction markets. We suggest that using multiple methods can help triangulate estimates so as to arrive at better risk estimates.