Adding a Black Scholes Routine to Quantitative Risk Assessment Decision Support Systems

We discuss the potential benefit from merging a suggested Black-Scholes algorithm with the CREAM (CREAtivity Machine) software system for risk assessments. The suggested Black-Scholes algorithm is an application of the Black–Scholes option pricing formula to analyze variable climatic trend and variance driven services. The use of the formula is a novel approach that provides a simple and accessible way to quantify risks to at least a first-order approximation and it has been suggested by Sturm et al. (2017; J Clim 140:437:49) to examine risk and attributing that risk to climate variance vs. trend. CREAM is a risk mini-model that activates a creative process for stakeholders to identify and understand risks of complex socio-technical systems. CREAM is based on the premise that a new idea related to a risk can be represented as a fragment of a conceptual model that can be generated by means of an ontology-based approach for computational creativity. It works to apply computational creativity methods to the engineering problem of risk assessment in complex socio-technical systems. The whole set of risk mini-models for a specific risk constitutes a risk conceptual model. In our solution risk mini-models activate a creative process for stakeholders to identify, understand and compare climate risk variabilities. We discuss the robustness of the merged system and the use as a tool that facilitates true brainstorming process.