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Accounting for Seismic Risk in Financial Analysis of Property Investment

Beck, J. L. and Porter, K. A. and Shaikhutdinov, R. (2002) Accounting for Seismic Risk in Financial Analysis of Property Investment. In: Proceedings of the New Zealand Society for Earthquake Engineering Conference. , Paper No. 6.2.

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A methodology is presented for making property investment decisions using loss analysis and the principles of decision analysis. It proposes that the investor choose among competing investment alternatives on the basis of the certainty equivalent of their net asset value which depends on the uncertain discounted future net income, uncertain discounted future earthquake losses, initial equity and the investor’s risk tolerance. The earthquake losses are modelled using a seismic vulnerability function, the site seismic hazard function, and an assumption that strong shaking at a site follows a Poisson process. A building-specific vulnerability approach, called assembly-based vulnerability, or ABV, is used. ABV involves a simulation approach that includes dynamic structural analyses and damage analyses using fragility functions and probability distributions on unit repair costs and downtimes for all vulnerable structural and nonstructural components in a building. The methodology is demonstrated using some results from a seven-storey reinforced-concrete hotel in Los Angeles.

Item Type:Book Section
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Subject Keywords:property investment, market and seismic risk, loss analysis, decision analysis
Record Number:CaltechAUTHORS:20120919-160406172
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:34246
Deposited By: Carmen Nemer-Sirois
Deposited On:25 Sep 2012 21:41
Last Modified:03 Oct 2019 04:17

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