2016 INFORMS Annual Meeting Program

SD42

INFORMS Nashville – 2016

SD42 207D-MCC

SD44 208B-MCC

The OTC Derivatives Market Reform and the Subsequent Interplay betwen Banks and CCPs Sponsored: Financial Services Sponsored Session Chair: Ghamami Samim, Federal Reserve Board, 20th St and Constitution Ave NW, Washington, DC, 20551, United States, samim.ghamami@frb.gov 1 - OTC Derivatives Reform and the Subsequent Interplay Between Banks and Central Counterparties Samim Ghamami, Federal Reserve Board, samim.ghamami@frb.gov We first discuss the G-20 reform program in the over-the-counter (OTC) derivatives markets and the subsequent Basel risk capital, collateral, liquidity, and leverage regulation. Next and after a brief review of derivatives central counterparties (CCPs), we present the paper “Does OTC derivatives reform incentivize central clearing?” Ghamami and Glasserman [2016].

Robust Decision Analysis Sponsored: Decision Analysis Sponsored Session Chair: Erin Baker, Univ of Massachusetts-Amherst, Amherst, MA, United States, edbaker@ecs.umass.edu 1 - Robust Sensitivity Analysis In Climate Change Modelling Emanuele Borgonovo, Bocconi University, emanuele.borgonovo@unibocconi.it, Max D. Morris, Elmar Plischke In several situations, analysts are not able to assign a unique distributions to the inputs of a computer code. Especially when alternative opinions are received by experts, analysts may combine alternative assessments using a mixture. The removal of the unique distribution assumption creates several issues in global sensitivity analysis, which we address systematically in this work. 2 - Climate Informed Decision Analysis: Do We Need Probabilities? Casey Brown, University of Massachusetts, Amherst, casey@engin.umass.edu The projected impacts of climate change often include untenable implications for many infrastructure systems. Planners and policy makers seek the best possible sources of climate change projections and information to assist their decision making needs. However, the dominance of climate science oriented toward mitigation of greenhouse gas emission questions leads to a disorientation of research focused on adaptation to climate change impacts. A break from “impact analysis” methods is needed, and a climate informed decision analysis is proposed in response. The question of use of probabilities, in particular, is analyzed. 3 - Finding Common Ground When Experts Disagree: Robust Portfolio Decision Analysis Erin Baker, Univ. of Massachusetts - Amherst, edbaker@ecs.umass.edu, Valentina Bosetti, Ahti Salo We address the problem of choosing a portfolio of policies under “deep uncertainty.” We introduce the idea of belief dominance as a way to derive a set of non-dominated portfolios and robust individual alternatives. The belief dominance concept allows us to synthesize multiple expert - or model - based beliefs by uncovering the range of alternatives that are intelligent responses to the range of beliefs. We illustrate our approach using an important problem in the climate change and energy policy context: choosing among clean energy technology R&D portfolios. SD45 209A-MCC Quantitative Methods in Risk Management Invited: Risk and Compliance Invited Session Chair: Agostino Capponi, Columbia University, 500 West 120th Street, New York, NY, 10027, United States, ac3827@columbia.edu 1 - Managing Systemic Risk In Inhomogeneous Financial Networks Nils Detering, University of California Santa Barbara, Santa Barbara, CA, 93106, United States, detering@pstat.ucsb.edu, Thilo Meyer-Brandis, Konstantinos Panagiotou, Daniel Ritter To quantify and manage systemic risk in the interbank market, we propose a weighted, directed random network model. The vertices in the network are financial institutions and the weighted edges represent credit exposures between them. Our model resembles the strong degree of heterogeneity observed in empirical data and generalizes earlier work based on the configuration model to inhomogeneous random graphs with unbounded variance of the degree sequence. We study the networks resilience to local shocks (only a few initially defaulted institutions) and derive capital charges, which ensure the networks resilience. 2 - Information Relaxation Bounds And The Dynamic Assortment Problem David Brown, Duke University, dbbrown@duke.edu, Jim Smith n this talk, we discuss the use of information relaxation bounds to generate performance bounds for dynamic programming problems. We focus on the dynamic assortment problem (Caro and Gallien 2007) and show how the information relaxation bounds improve upon Lagrangian relaxation bounds.

SD43 208A-MCC Values and Decision-Making Sponsored: Decision Analysis Sponsored Session

Chair: Johannes Siebert, University of Bayreuth, Universitätsstr. 30, Bayreuth, 95440, Germany, Johannes.Siebert@uni-bayreuth.de 1 - Identifying, Structuring, And Using Personal Strategic Life Objectives Ralph L. Keeney, Duke University, San Francisco, CA, United States, keeneyr@aol.com Most individuals desire a quality life, but have not articulated the objectives necessary to pursue and reasonably achieve such a life. This presentation discusses how to identify your personal strategic life objectives and how to use them to enhance the quality of your life. 2 - Identifying, Structuring, And Comparing Objectives Of Terrorists Detlof von Winterfeldt, Center for Risk and Economic Analysis of Terrorism Events (CREATE), University of Southern California, Los Angeles, CA, CA 90089, United States, winterfe@usc.edu Johannes Siebert, Richard S John, Gregory Keeney, Heather Rosoff The risk of terrorism is of great concern to many countries and significant resources are spent to counter this threat. A better understanding of the motivation of terrorists and their reasons for selecting certain modes and targets of attack can help improve the decisions to allocate resources in the fight against terrorism. We develop methods using principles of decision analysis and value- focused thinking to identify, structure, and compare objectives of terrorists. We use our methods to provide the key decision makers in the Pentagon with a sound basis for fighting the terrorist groups. 3 - Enhancing Life Satisfaction By Improving Proactive Cognitve Skills Johannes Siebert, University of Bayreuth, Johannes.Siebert@uni-bayreuth.de, Reinhard Kunz The Proactive Decision Making scale, which is based on the concepts of value- focused thinking and decision quality, measures proactive personality traits and cognitive skills in decision-making. We show that proactive cognitive skills can explain up to 36% of life satisfaction, i.e. proactive decision makers are more satisfied with their decisions and with their lives. Furthermore, we provide empirical evidence that proactive cognitive skills can be trained in a course on decision-making. We recommend schools, colleges, and universities to offer more courses on decision-making to enhance student`s proactive cognitive skills and satisfaction with their decisions and lives.

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