PhD Studentship: Using Real Options Analysis to Manage Financial and Environmental Risks in Major T
Engineering & the Environment
Location: Highfield Campus
Closing Date: Friday 09 March 2018
Project Reference: CDT-SIS-115
The risks of cost over-runs in major transport infrastructure projects are well documented, whilst poor environmental performance, particularly with respect to carbon emissions, has become a concern in recent years. The current approach to financial risk is to make an appraisal optimism adjustment to cost estimates, although this has the danger of institutionalising high cost levels. A more proactive approach to risk management is provided by real options analysis, which originated with options in financial markets being extended to physical assets and has been applied to engineering projects (e.g. Crossrail). The basic idea is that a project contractor will pay a premium to the project sponsor to have the options to grow, contract or defer a project. Such an approach could be used to jointly examine the achievement of cost and environmental targets. It is proposed that this work would involve consideration of both discrete time steps (through the use of multi-period binomial lattices) and continuous time steps (through the use of the Black-Scholes model). A case study will be provided by HS2, the proposed high speed rail line between London, Birmingham and Leeds/Manchester, although it is expected that some of the results will have generic applicability throughout the infrastructure project life-cycle, including design, construction, operation and maintenance.
If you wish to discuss any details of the project informally, please contact John Preston, Transportation Research Group, Email: firstname.lastname@example.org, Tel: +44 (0) 2380 59 4660.
This project is run through the EPSRC Centre for Doctoral Training in Sustainable Infrastructure Systems.
To apply, please use the following website: http://www.southampton.ac.uk/engineering/postgraduate/research_degrees/apply.page
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