Title: A financial-option procedure for determining a fuzzy discount rate in radioactive waste management
Authors: Pierre L. Kunsch
Addresses: ONDRAF/NIRAS, 14 avenue des Arts, BE-1210 Brussels, Belgium
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.
Keywords: asset allocation; fuzzy discount rate; put-option theory; radioactive waste management; financial option theory; nuclear waste; waste management; fuzzy funding; simulation; nuclear industry.
International Journal of Nuclear Knowledge Management, 2007 Vol.2 No.4, pp.363 - 374
Published online: 12 Jun 2007 *Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article