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Real Options Analysis Framework for the Optimal Timing of Network Infrastructure Systems Retrofits

Roghani, Mehran | 2022

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 55464 (09)
  4. University: Sharif University of Technology
  5. Department: Civil Engineering
  6. Advisor(s): Kashani, Hamed
  7. Abstract:
  8. Natural disasters can damage the infrastructure of society. Damages to the infrastructure components of society can disrupt their service delivery. Disruption in providing services to society's infrastructure can disrupt social and economic activities and impose various significant costs on society. The cost of repairing the damaged infrastructure and reducing the income of households are among the economic damages of accidents. The decline in the quality of life, as well as the death and injury of people due to the breakdown of the infrastructure or the disruption in their services, are among the social damages caused by accidents. In the same way, natural disasters are considered a significant challenge in achieving sustainable development goals of human societies. Therefore, improving the resilience of society's infrastructure against crises should be prioritized. One of the ways to improve the resilience of infrastructures and reduce the economic and social harmful effects mentioned above is to reduce the vulnerability of infrastructures through their retrofitting. Rehabilitating infrastructure against accidents is a costly and time-consuming activity. In order to optimally use limited budgetary resources, a suitable model for determining the appropriate pattern of resource allocation to retrofitting projects should be provided to planners and decision-makers in the field of infrastructure management. In the past, various investment planning and optimization models have been presented for infrastructure retrofitting. One of the models presented is based on analyzing natural options that can produce the right time to allocate resources to retrofitting projects. Existing real options models have limitations. The most important shortcoming of these models is that they are limited to determining the optimal time for retrofitting an infrastructure component. This is despite the fact that most infrastructures have a network nature with mutual dependencies. These dependencies can be dependencies between a specific group of infrastructures, such as a network of bridges in a region or a city. On the other hand, these interdependencies can be between two or more specific categories of infrastructure, such as the dependency of the water supply network infrastructure on the electricity distribution network. The interdependence of infrastructures means that the damage to infrastructure and the disruptions caused by it cause disruptions in its dependent infrastructures and have cascading consequences. This research aims to provide a framework based on natural options analysis to determine the optimal time to retrofit network infrastructure projects against possible future risks. The presented model considers possible future risks, such as natural disasters, as well as the consequences and costs caused by them in the form of probabilities and provides an optimal plan for retrofitting the infrastructure components. The main feature of this model is the analysis and investigation of infrastructures in a networked manner and the investigation of the effects of each infrastructure on other infrastructures. After developing the framework, its efficiency and capabilities presented in the form of a case study will be investigated
  9. Keywords:
  10. Risk Management ; Optimization ; Real Option Method ; Financial Management ; Seismic Resilience ; Urban Infrastructure ; Network Resiliance ; Financial Programming

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