Security vulnerabilities can represent enormous risks to society and business organizations. A large percentage of vulnerabilities in software are discovered by individuals external to the developing organization. These vulnerabilities are often exchanged for monetary rewards or a negotiated selling price, giving rise to vulnerability markets. Some of these markets are regulated, while some are unregulated. Many buyers in the unregulated markets include individuals, groups, or government organizations who intend to use the vulnerabilities for potential attacks. Vulnerabilities traded through such markets can cause great economic, organizational, and national security risks. Vulnerability markets can reduce risks if the vulnerabilities are acquitted and remedied by the software developers. Studying vulnerability markets and their related issues will provide an insight into their underlying mechanisms, which can be used to assess the risks and develop approaches for reducing and mitigating the potential risks to enhance the security against the data breaches.;Some of the aspects of vulnerability---discovery, dissemination, and disclosure---have received some recent attention. However, the role of interaction among the vulnerability discoverers and vulnerability acquirers has not yet been adequately addressed. This dissertation suggests that a major fraction of discoverers, a majority in some cases, are unaffiliated with the software developers and thus are free to disseminate the vulnerabilities they discover in any way they like. As a result, multiple vulnerability markets have emerged. In recent vulnerability discovery literature, the vulnerability discoverers have remained anonymous. Although there has been an attempt to model the level of their efforts, information regarding their identities, modes of operation, and what they are doing with the discovered vulnerabilities has not been explored.;Reports of buying and selling the vulnerabilities are now appearing in the press; however, the nature of the actual vulnerability markets needs to be analyzed. We have attempted to collect detailed information. We have identified the most prolific vulnerability discoverers throughout the past decade and examined their motivation and methods. A large percentage of these discoverers are located outside of the US. We have contacted several of the most prolific discoverers in order to collect firsthand information regarding their techniques, motivations, and involvement in the vulnerability markets. We examine why many of the discoverers appear to retire after a highly successful vulnerability-finding career. We found that the discoverers had enough experience and good reputation to work officially with a good salary in some well-known software development companies.;Many security breaches have been reported in the past few years, impacting both large and small organizations. Such breaches may occur through the exploitation of system vulnerabilities. There has been considerable disagreement about the overall cost and probability of such breaches. No significant formal studies have yet addressed this issue of risk assessment, though some proprietary approaches for evaluating partial data breach costs and probabilities have been implemented. These approaches have not been formally evaluated or compared and have not been systematically optimized. This study proposes a consolidated approach for identifying key factors contributing to the breach cost by minimizing redundancy among the factors. Existing approaches have been evaluated using the data from some of the well-documented breaches. It is noted that the existing models yield widely different estimates. The reasons for this variation are examined and the need for better models is identified. A complete computational model for estimating the costs and probabilities of data breaches for a given organization has been developed. We consider both the fixed and variable costs and the economy of scale. Assessing the impact of data breaches will allow organizations to assess the risks due to potential breaches and to determine the optimal level of resources and effort needed for achieving target levels of security.
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