Risk assessment of strategies using total time on test transform

Abstract

This paper proposes a new approach to risk assessment of strategies based on the total time on test (TTT) transform techniques. A new concept of risk of loss is introduced, whose value is determined by potential losses and corresponding probabilities of all unfavourable cases. It is closely related to the maximum acceptable (cost) value (MAV) set by a decision maker. How to calculate the value of risk of loss for a given strategy and a MAV is described in depth and a final formula is derived. The values of risk of loss of different strategies can be used for comparisons of these strategies in terms of overall potential losses for the purpose of assisting decision makers in choosing a better strategy. The results of this method can provide specific information about the risk of loss of a strategy. Two examples are used to demonstrate the usage of this method. The scaled TTT plot method and this risk of loss method are applied to the example A and the results of both methods agree with each other. In the example B to which the scaled TTT method is not applicable, the risk of loss method can provide reasonable solutions. This new method can be used for other situations in which the TTT concepts are valid.