CAREER: Optimal Design, Policy and Risk Management of Central Nodes in Stochastic Networks

Cornell University, Ithaca NY

Investigators

Abstract

The goal of this Faculty Early Career Development (CAREER) award is to develop a comprehensive framework for the design of and optimal resource allocation in star-shaped stochastic networks with a central control node. The central node serves to manage system risk by pooling a portion of the resources of each individual node and underwriting a node that falls below a threshold value. This project will advance methodologies in both operations research and stochastic analysis. Such systems arise in many contexts, including distributed retail operations, where resources are inventories of goods and backordering is allowed, and financial networks, where resources are cash and other capital assets and individual nodes may experience cash shortfalls. The education plan will broaden participation of females in STEM fields through a structured week-long outreach activity with female high school students and by organizing special sessions for junior female researchers to interact with senior female executives in the risk management and financial industry at an annual national conference. Resources of the central node and individual nodes are modeled as multidimensional marked point processes, and first passage times are characterized and studied. Optimal contributions from each node to the pooled central node are determined by considering individual nodes' stochastic behavior in a cooperative game-theoretic setting, and the Nash equilibrium of these games will be studied. The case where the central node has an independent Brownian component that can enhance system operation will be also be considered. The developed models will be calibrated with available data.