The Harold and Inge Marcus Department of Industrial and Manufacturing Engineering Welcomes Distinguished Lecturer: Kenneth Doerr

Abstract

Value-at-Risk is a metric used heavily in the finance sector, especially banking, to assess the downside risk associated with a potential catastrophic event, such as the risk that a bank will run out of cash. It is a quantile risk measure. Dr. Doerr will compare this risk metric to other risk metrics commonly used in logistics, and review existing applications of Value-at-Risk (under other names) in logistics, where it is already used to manage inventory and project schedules. He will contend that Value-at-Risk has some unique advantages, in behavioral decision making terms, over more commonly used measures. Dr. Doerr will propose its use for a certain kind of stochastic capacity planning (readiness analysis), important in the defense sector, and describe some results obtained using a Value-at-Risk metric he calls readiness risk. He will discuss some open behavioral decision making issues related to the application of quantile risk measures such as Value-at-Risk, especially as compared to more complex loss models.