Real options and sustainable transport

In this book, we study the problem of investing in sustainable transport to relieve air pollution. In such a case, the growth of the city population is the major source of uncertainty, as a high population density increases pollution and, on the other hand, makes a big transportation project necessary. Using the real options method, we show how to maximize inter-generational utility when the population grows stochastically. In a second step, we study the same problem of investing in sustainable transport under both population-growth and investment cost uncertainties. In such a case, the growth of the city population increases the demand for a sustainable transport by increasing pollution, and, in the same time, the investment cost is decreasing stochastically with time. This corresponds to a hydrogen fuel infrastructure construction, whose cost is stochastically decreasing due to the worldwide R&D effort. Using the real options method, we show how to maximize inter-generational utility by choosing the optimal time to invest.

Autorentext

Linda Salahaldin obtained an MS in finance and a Ph.D. in Economis from University of Paris Dauphine in 2002 and 2007, respectively. Since 2006, she is an assistant professor at several French universities (Paris Dauphine, Supelec, HEC, Telecom & Management SudParis). Her research interests include real options and sustainable development.