Value of Options in Airport Expansion - Example of AICM
http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal00149.pdf
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
European Regional Science Association
2012
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| Online Access: | http://hdl.handle.net/1721.1/71258 |
| _version_ | 1811091409926619136 |
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| author | Morgado, Frederico Nagaralu, Sai Suresh Macario, Rosario de Neufville, Richard |
| author2 | Massachusetts Institute of Technology. Engineering Systems Division |
| author_facet | Massachusetts Institute of Technology. Engineering Systems Division Morgado, Frederico Nagaralu, Sai Suresh Macario, Rosario de Neufville, Richard |
| author_sort | Morgado, Frederico |
| collection | MIT |
| description | http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal00149.pdf |
| first_indexed | 2024-09-23T15:01:58Z |
| format | Article |
| id | mit-1721.1/71258 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:01:58Z |
| publishDate | 2012 |
| publisher | European Regional Science Association |
| record_format | dspace |
| spelling | mit-1721.1/712582022-10-02T00:04:48Z Value of Options in Airport Expansion - Example of AICM Morgado, Frederico Nagaralu, Sai Suresh Macario, Rosario de Neufville, Richard Massachusetts Institute of Technology. Engineering Systems Division de Neufville, Richard de Neufville, Richard http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal00149.pdf Investments decisions for airport capacity expansion are usually taken, either when demand exceeds the current capacity and the airport is working under congestion, or when current demand is expected to overcome current capacity sometime in the near future. In any case, decisions are taken taking into account forecasts of future demand. In many situations, deterministic analysis lead to a discouraging net present value (NPV) which in turn causes delays in the deciding process and eventually leads to further losses. This paper takes the Mexico City International Airport (AICM) as example, and performs an analysis of expansion investment, both in runways and terminals capacity, taking a perspective that is twofold: we take uncertainty of demand into account based on historical data of relevant parameters; we use flexibility in design by incorporating options in project, for both new runways and new terminal. Using a binomial lattice model, we calculate the value of options, perform sensitivity analysis and determine the expected statistical distribution of NPV. We obtain significant differences when compared with the deterministic perspective, and illustrate by example how real options and flexible design may dramatically improve the attractiveness of an investment decision. 2012-06-28T18:32:01Z 2012-06-28T18:32:01Z 2011-09 Article http://purl.org/eprint/type/ConferencePaper http://hdl.handle.net/1721.1/71258 Morgado, Frederico et al. "Value of Options in Airport Expansion - Example of AICM." in Proceedings of the European Regional Science Association, 51st European Congress, Barcelona, Spain, 30th August–3rd September 2011. en_US http://www.ersa.org/IMG/pdf/conference_program-2.pdf Proceedings of the European Regional Science Association Conference Papers, ERSA 2011 Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf European Regional Science Association MIT web domain |
| spellingShingle | Morgado, Frederico Nagaralu, Sai Suresh Macario, Rosario de Neufville, Richard Value of Options in Airport Expansion - Example of AICM |
| title | Value of Options in Airport Expansion - Example of AICM |
| title_full | Value of Options in Airport Expansion - Example of AICM |
| title_fullStr | Value of Options in Airport Expansion - Example of AICM |
| title_full_unstemmed | Value of Options in Airport Expansion - Example of AICM |
| title_short | Value of Options in Airport Expansion - Example of AICM |
| title_sort | value of options in airport expansion example of aicm |
| url | http://hdl.handle.net/1721.1/71258 |
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