A financial-option procedure for determining a fuzzy discount rate in radioactive waste management. (13th June 2007)

• Record Type: Journal Article
• Authors: Kunsch, Pierre L.
• Is Part Of: International journal of nuclear knowledge management. Volume 2:Number 4(2007)
• Page Start: 363
• Page End: 374
• Publication Date: 2007-06-13
• Subjects: asset allocation -- fuzzy discount rate -- put-option theory -- radioactive waste management -- financial option theory -- nuclear waste -- waste management -- fuzzy funding -- simulation -- nuclear industry; Nuclear energy -- Periodicals; Nuclear energy -- Management -- Periodicals; Nuclear industry -- Periodicals; Nuclear industry -- Management -- Periodicals; 333.792405
• Languages: English
• ISSNs: 1479-540X

Abstract

This paper proposes a procedure based on financial-option theory for establishing a fuzzy discount rate for radioactive waste management. Funding is made available in a dedicated fund for covering future liabilities, including technical-scenario uncertainties. Assets in the fund are managed according to some given strategic asset allocation. Put-option theory is used for testing the suitability of potential discount-rate values with respect to some minimum requirements on risk levels at different time horizons. In this way, a triangular fuzzy number representing the discount rate is derived. Fuzzy funding is computed by simulation using the fuzzy discount rate: it includes an additional premium based on the put-option value to cover the residual financial risk.