The Optimal Timing for the Construction of an Airport

• Type: Summary of Presentation in an International Conference
• Date: 2006

Authors

Paulo Jorge Pereira (Author) FEP; Artur J. Rodrigues (Author) FEP; Armada, Manuel R (Author) FEP

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Resumo (PT): In this paper we study the option to invest in a new international airport, considering that the benefits of the investment behave stochastically. In particular, the number of passengers, and the cash flow per passenger are both assumed to be random. Additionally, positive and negative shocks are also incorporated, which seems to be realistic for this type of projects. Accordingly, we propose a new real options model which combines two stochastic factors with positive and negative shocks. While the authors developed this model having as reference the project for the new airport in Lisbon, the model can be applied to other airports investments, and, eventually with minimal adaptations, it can also be applied to projects in different areas.

Abstract (EN): In this paper we study the option to invest in a new international airport, considering that the benefits of the investment behave stochastically. In particular, the number of passengers, and the cash flow per passenger are both assumed to be random. Additionally, positive and negative shocks are also incorporated, which seems to be realistic for this type of projects. Accordingly, we propose a new real options model which combines two stochastic factors with positive and negative shocks. While the authors developed this model having as reference the project for the new airport in Lisbon, the model can be applied to other airports investments, and, eventually with minimal adaptations, it can also be applied to projects in different areas.

Language: Portuguese

Type (Professor's evaluation): Scientific

Notes: http://realoptions.org/abstracts_2006.html