In light of the 2011 Fukushima disaster, recent discussion has focused on finding the best nuclear storage options, maximizing the oversight power of global institutions, and strengthening safety measures. In addition to these, the development of dependable liability coverage that can be tapped in an emergency is also needed and should be considered thoughtfully. To succeed, financing is essential using special-purpose instruments from the global bond market, which is as big as US$175 trillion. Thus, in this paper, for the first time, a two-coverage-type trigger nuclear catastrophe (N-CAT) risk bond for potentially supplementing the covering of U.S. commercial nuclear power plants (NPPs) beyond the coverage per the Price Anderson Act as amended, and potentially other plants are proposed and designed worldwide. The N-CAT peril is categorized by three risk layers: incident, accident, and major accident. The pricing formula is derived by using a semi-Markovian dependence structure in continuous time. A numerical application illustrates the main findings of the paper.
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December 2016
Research Papers
Toward Resilience to Nuclear Accidents: Financing Nuclear Liabilities via Catastrophe Risk Bonds Available to Purchase
Bilal M. Ayyub,
Bilal M. Ayyub
Center for Technology and Systems Management,
e-mail: [email protected]
University of Maryland
, College Park, MD 20742
e-mail: [email protected]
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Athanasios A. Pantelous,
Athanasios A. Pantelous
Department of Mathematical Sciences and
Institute for Risk and Uncertainty,
e-mail: [email protected]
Institute for Risk and Uncertainty,
University of Liverpool
, Liverpool L69 7ZL
, UK
e-mail: [email protected]
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Jia Shao
Jia Shao
Department of Mathematical Sciences and
Institute for Risk and Uncertainty,
e-mail: [email protected]
Institute for Risk and Uncertainty,
University of Liverpool
, Liverpool L69 7ZL
, UK
e-mail: [email protected]
Search for other works by this author on:
Bilal M. Ayyub
Center for Technology and Systems Management,
e-mail: [email protected]
University of Maryland
, College Park, MD 20742
e-mail: [email protected]
Athanasios A. Pantelous
Department of Mathematical Sciences and
Institute for Risk and Uncertainty,
e-mail: [email protected]
Institute for Risk and Uncertainty,
University of Liverpool
, Liverpool L69 7ZL
, UK
e-mail: [email protected]
Jia Shao
Department of Mathematical Sciences and
Institute for Risk and Uncertainty,
e-mail: [email protected]
Institute for Risk and Uncertainty,
University of Liverpool
, Liverpool L69 7ZL
, UK
e-mail: [email protected]
Manuscript received May 7, 2015; final manuscript received April 29, 2016; published online August 19, 2016. Assoc. Editor: James Lambert.
ASME J. Risk Uncertainty Part B. Dec 2016, 2(4): 041005 (9 pages)
Published Online: August 19, 2016
Article history
Received:
May 7, 2015
Revision Received:
April 29, 2016
Accepted:
April 29, 2016
Citation
Ayyub, B. M., Pantelous, A. A., and Shao, J. (August 19, 2016). "Toward Resilience to Nuclear Accidents: Financing Nuclear Liabilities via Catastrophe Risk Bonds." ASME. ASME J. Risk Uncertainty Part B. December 2016; 2(4): 041005. https://doi.org/10.1115/1.4033518
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