A Real Option Methodology To Determine The
Optimal Intervention Windows For Railway
Infrastructure
Author(s)
N. Lethanh & B. T. Adey
Abstract
In this paper, a real option methodology is presented for the determination of the
optimal expected time in the future for a railway infrastructure manager to decide
what types of interventions, if any, are to be executed. This time is herein
referred to as the optimal time to decide to execute an intervention to emphasize
that when the time is fixed it is not yet known if interventions will actually be
executed. Such a methodology is particularly useful in the management of
railway infrastructure that belongs to a multinational freight corridor where
multiple railway management organizations are involved. Every time one
executes an intervention it can affect the flow of trains on the part of the
infrastructure controlled by others. In the methodology an adaptation of
the model used to value options in financial engineering using the Black and
Scholes differential equation is used. The model enables the valuation of the
ability to wait to decide to determine whether or not an intervention should be
executed. The methodology is demonstrated by determining the optimal time to
decide to execute interventions on a fictive rail corridor for a railway
management organization. Use of the methodology is expected to improve the
coordination of the execution of interventions on multiple parts of the corridor,
and give a period of time in which it is relatively certain that no interventions
will be executed.
Keywords: maintenance, rail infrastructure, real options.
Keywords
maintenance, rail infrastructure, real options.
Related Book
Other papers in this volume
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