Predicting the dynamic nature of risk

The trusting peer in order to determine the likelihood of the loss in its resources might analyze the Risk before engaging in an interaction with any trusted peer. This likelihood of the loss in the resources is termed as Risk in the interaction. Risk analysis is important in e-commerce transactions because of the vast literature that argues that the decision to buy is based on the Risk-adjusted cost-benefit analysis. If the trusting peer can determine the future Riskiness value or reputation of a trusted peer for the time period of its interaction, before engaging in an activity with it, then it can ease its decision making process of whether to interact with the trusted peer or not. In this paper we present such a novel method which predicts the dynamic nature of Risk and determines the future Riskiness value of the trusted peer, before the interaction starts, thus helping the trusting peer considerably in making its decision. © 2006 IEEE