Interdependency analysis: Extensions to demand reduction inoperability input-output modeling and portfolio selection.

摘要

Interdependency analysis in the dissertation connotes a process of assessing and managing risks inherent in a system of interconnected entities (e.g., infrastructures or industry sectors). The following are two distinct extensions of interdependency analysis which constitute the contributions of the dissertation: (i) The demand reduction inoperability input-output model is used to account for the adverse impact of reductions on the consumption for the goods/services of a perturbed sector. Modern sectors of the economy to date generally exhibit higher degrees of interdependencies-making them more vulnerable to natural and human-caused catastrophes. Such extreme events not only can impair the operations of interconnected sectors, but also can degrade the demand for their outputs. By utilizing the principles of input-output and decomposition analysis, the dissertation presents a framework for modeling how the demand-based inoperability can propagate and proliferate through a system of interconnected infrastructure or industry sectors. (ii) The application of interdependency analysis on the field of finance is explored in two proposed portfolio selection models, namely: (a) a hybrid of the Markowitz mean-variance method and the partitioned multiobjective risk method in which the underlying asset interdependencies are implied in the covariance of the historical asset returns, and (b) a model which utilizes the Bureau of Economic Analysis (BEA) industry-by-industry input-output matrices to gain additional insights on the relationships among portfolio assets. In the aforementioned portfolio selection models, interdependency analysis addresses the issue of diversification to enhance a portfolio's robustness against business as usual, as well as extreme, market risks.