Discounting, catastrophic risks management and vulnerability modeling

Y. Ermoliev, T. Ermolieva, G. Fischer, M. Makowski, S. Nilsson and M. Obersteiner

Mathematics and Computers in Simulation (MATCOM), 2008, vol. 79, issue 4, 917-924

Abstract: Traditional discounting dramatically affects the outcome of catastrophic risk management and spatio-temporal vulnerability modeling. The misperception of discount rates produces inadequate evaluations of risk management strategies, which may provoke catastrophes and significantly contribute to the increasing vulnerability of our society. This paper analyses the implication of potential catastrophic events on the choice of discounting. In particular, it shows the necessity of using proposed equivalent undiscounted stopping time criterion and Monte Carlo based stochastic optimization procedures.

Keywords: Catastrophic risks; Discounting; Stochastic optimization (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:79:y:2008:i:4:p:917-924

DOI: 10.1016/j.matcom.2008.02.004

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