A Real Option Model with Stochastic Variables of Construction Timing Selection of Urban Rail Transit Projects
Qiang Sun · Journal of the China Railway Society · 2008
Considering uncertainty,irreversibility,flexibility and public characteristics of rail transit investment,a real option model with stochastic variables for determining construction timing of rail transit projects is presented.The geometric brownian motion was used to describe uncertainty factors of rail transit investment including passenger flow and construction cost in the model.The influence functions of construction timing of the uncertainty factors were deduced to reveal the influence of deferring investment.Operational value and guidable value were defined to reflect economic benefits and social benefits of investment.Monte Carlo simulation and OptQuest were used to determine the optimal construction timing with different goals.The case study shows the construction timing result of considering guidable value is different from the result of merely considering operational value.Research results provide a theoretical foundation for rail transit development planning and decision-making.