Implications of black swans to the foundations and practice of risk assessment and management

In this article, we discuss how to deal with black swans in a risk context. A black swan is here understood as a surprising extreme event relative to one׳s knowledge/beliefs, and can be of different types: a) unknown unknowns, b) unknown knowns (we do not have the knowledge but others do) and c) events that are judged to have a negligible probability of occurrence and thus are not believed to occur. In the article, we review the current...