Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection

Farrow, Scott; Scott, Michael J.

doi:10.1002/wrcr.20217

Cited by 13 publications

(7 citation statements)

References 34 publications

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“…If damages are rising faster than the probability is declining, it is possible that no mean value exists. In contrast, for a concave damage function investigated for flooding [49]; the mean values using a risk neutral and a risk averse utility function, and a weighting based on cumulative prospect theory were not substantially different. In part, the large losses where risk aversion can have a significant effect were associated with sufficiently small probabilities that the distinction was small between the mean values using a risk neutral or a risk averse utility function.…”

Section: Large Losses and Risk Aversionmentioning

confidence: 80%

Cybersecurity Investment Guidance: Extensions of the Gordon and Loeb Model

Farrow¹,

Szanton²

2016

JIS

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Extensions of the Gordon-Loeb [1] and the Gordon-Loeb-Lucyshyn-Zhou [2] models are presented based on mathematical equivalency with a generalized homeland security model. The extensions include limitations on changes in the probability of attack, simultaneous effects on probability and loss, diversion of attack, and shared non-information defenses. Legal cases are then investigated to assess approximate magnitudes of external effects and the extent they are internalized by the legal system.

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Section: Large Losses and Risk Aversionmentioning

confidence: 80%

Cybersecurity Investment Guidance: Extensions of the Gordon and Loeb Model

Farrow¹,

Szanton²

2016

JIS

Self Cite

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“…As shown in Figure 3, we assume the loss in each probability bin is uniform. In the absence of a reliable estimate on the entire distribution of damages, this assumption is an easy compromise to obtain the foreseen loss for discrete flood events [30,44].…”

Section: ) Aggregate Annualized Loss (Aal)mentioning

confidence: 99%

Assessing Property Level Economic Impacts of Climate in the US, New Insights and Evidence from a Comprehensive Flood Risk Assessment Tool

Armal¹,

Porter

Lingle³

et al. 2020

Climate

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Hurricanes and flood-related events cause more direct economic damage than any other type of natural disaster. In the United States, that damage totals more than USD 1 trillion in damages since 1980. On average, direct flood losses have risen from USD 4 billion annually in the 1980s to roughly USD 17 billion annually from 2010 to 2018. Despite flooding’s tremendous economic impact on US properties and communities, current estimates of expected damages are lacking due to the fact that flood risk in many parts of the US is unidentified, underestimated, or available models associated with high quality assessment tools are proprietary. This study introduces an economic-focused Environmental Impact Assessment (EIA) approach that builds upon an our existing understanding of prior assessment methods by taking advantage of a newly available, climate adjusted, parcel-level flood risk assessment model (First Street Foundation, 2020a and 2020b) in order to quantify property level economic impacts today, and into the climate adjusted future, using the Intergovernmental Panel on Climate Change’s (IPCC) Representative Concentration Pathways (RCPs) and NASA’s Global Climate Model ensemble (CMIP5). This approach represents a first of its kind—a publicly available high precision flood risk assessment tool at the property level developed completely with open data sources and open methods. The economic impact assessment presented here has been carried out using residential buildings in New Jersey as a testbed; however, the environmental assessment tool on which it is based is a national scale property level flood assessment model at a 3m resolution. As evidence of the reliability of the EIA tool, the 2020 estimated economic impact (USD 5481 annual expectation) was compared to actual average per claim-year NFIP payouts from flooding and found an average of USD 5540 over the life of the program (difference of less than USD 100). Additionally, the tool finds a 41.4% increase in average economic flood damage through the year 2050 when environmental change is included in the model.

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“…A flood's impact also can be exacerbated by other natural events such as storm surges (Strauss et al, 2012); strong winds and/or simply more rain, however gentle, upon already sodden soil (Agence France-Presse, 2010). Flooding waters cause damage to property, businesses and peoples' lives (Farrow and Scott, 2013), with ongoing impacts felt throughout the community (Scott, et al, 2012). As the waters bring with them silt and other debris, it can take many months after a flood has occurred for areas to be cleaned before essential reconstruction work may begin.…”

Section: Literature Reviewmentioning

confidence: 99%

After the rains: water’s impact for valuation practices

Cradduck

2016

Property Management

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Purpose – The purpose of this paper is to reduce the potential for litigation by improving valuers’ awareness of water risks. As part of a valuer’s due diligence, the paper provides guidance as to how to identify such risks by explaining the different types and examining how online search tools can be used in conjunction with more traditional methods to evaluate the probability of these risks occurring. Design/methodology/approach – The paper builds on prior research, which examined the impact of water to and for valuations. By means of legal/doctrinal analysis, this paper considers relevant issues from the perspective of managing client expectations and needs. In so doing it identifies online tools available to assist in identifying at risk properties and better informing clients. Findings – While the internet provides a variety of tools to gain access to relevant information, this information most commonly is only provided subject to disclaimer. Valuers need to ensure that blind reliance is not given to use of these tools but that the tools are used in conjunction with individual property inspections. Research limitations/implications – Although the examples considered primarily are Australian, increasing water risks generally make the issues considered relevant for any jurisdiction. The research will be of particular interests to practitioners in coastal or riverine areas. Practical implications – Valuation reports are sought for a variety of purposes from a variety of clients. These range from the experienced, knowledgeable developer looking to maximise available equity to the inexperienced, uneducated individual looking to acquire their home and thinking more often than not with their heart not their head. More informed practices by valuers will lead to valuation reports being more easily understood by clients, thus lessening the likelihood of litigation against the valuer for negligence. Originality/value – The paper highlights the issue of water risks; the need for valuers to properly address potential and actual risks in their reports; and the corresponding need to undertake all appropriate searches and enquiries of the property to be valued. It reinforces the importance of access to the internet as a tool in the valuation process.

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Comparing multistate expected damages, option price and cumulative prospect measures for valuing flood protection

Cited by 13 publications

References 34 publications

Cybersecurity Investment Guidance: Extensions of the Gordon and Loeb Model

Cybersecurity Investment Guidance: Extensions of the Gordon and Loeb Model

Assessing Property Level Economic Impacts of Climate in the US, New Insights and Evidence from a Comprehensive Flood Risk Assessment Tool

After the rains: water’s impact for valuation practices

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