Next Article in Journal
A Generalized Semi-Analytical Solution for the Dispersive Henry Problem: Effect of Stratification and Anisotropy on Seawater Intrusion
Next Article in Special Issue
Adaptation Tipping Points of a Wetland under a Drying Climate
Previous Article in Journal
Low Frequency Waves Detected in a Large Wave Flume under Irregular Waves with Different Grouping Factor and Combination of Regular Waves
Previous Article in Special Issue
Phosphorus Solubilizing and Releasing Bacteria Screening from the Rhizosphere in a Natural Wetland
Article Menu
Issue 2 (February) cover image

Export Article

Open AccessArticle
Water 2018, 10(2), 229; https://doi.org/10.3390/w10020229

Sequencing Infrastructure Investments under Deep Uncertainty Using Real Options Analysis

Department of Civil and Environmental Engineering, National University of Singapore, Singapore 117576, Singapore
*
Author to whom correspondence should be addressed.
Received: 8 January 2018 / Revised: 12 February 2018 / Accepted: 12 February 2018 / Published: 23 February 2018
(This article belongs to the Special Issue Sponge Cities: Emerging Approaches, Challenges and Opportunities)
Full-Text   |   PDF [2851 KB, uploaded 23 February 2018]   |  

Abstract

The adaptation tipping point and adaptation pathway approach developed to make decisions under deep uncertainty do not shed light on which among the multiple available pathways should be chosen as the preferred pathway. This creates the need to extend these approaches by means of suitable tools that can help sequence actions and subsequently enable the outlining of relevant policies. This paper presents two sequencing approaches, namely, the “Build to Target” and “Build Up” approach, to aid in sub-selecting a set of preferred pathways. Both approaches differ in the levels of flexibility they offer. They are exemplified by means of two case studies wherein the Net Present Valuation and the Real Options Analysis are employed as selection criterions. The results demonstrate the benefit of these two approaches when used in conjunction with the adaptation pathways and show how the pathways selected by means of a Build to Target approach generally have a value greater than, or at least the same as, the pathways selected by the Build Up approach. Further, this paper also demonstrates the capacity of Real Options to quantify and capture the economic value of flexibility, which cannot be done by traditional valuation approaches such as Net Present Valuation. View Full-Text
Keywords: deep uncertainty; Real Options Analysis; sequencing approaches deep uncertainty; Real Options Analysis; sequencing approaches
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

Supplementary material

SciFeed
Printed Edition Available!
A printed edition of this Special Issue is available here.

Share & Cite This Article

MDPI and ACS Style

Manocha, N.; Babovic, V. Sequencing Infrastructure Investments under Deep Uncertainty Using Real Options Analysis. Water 2018, 10, 229.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Water EISSN 2073-4441 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top