Flexible lease contracts in the fleet replacement problem with alternative fuel vehicles: A real-options approach

Amir H. Ansaripoor and Fernando S. Oliveira

European Journal of Operational Research, 2018, vol. 266, issue 1, 316-327

Abstract: We study the use of flexible lease contacts in the fleet portfolio management problem of a firm that aims to minimize its cost and risk (Recursive Expected Conditional Value at Risk), simultaneously, in a stochastic multi-period setting by deciding which technologies to use in its fleet. We propose a model using real options (return and swap) to model contract flexibility and to account for different uncertainties (CO2 prices, fuel prices, mileage covered by a vehicle, fuel consumption, and technological). We analyse how fuel price uncertainty and technological progress influence the value of the options. We validate the results using a real-world case study conducted in the UK.

Keywords: Transportation; Fleet replacement; Real options; Risk management; Sustainability (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:266:y:2018:i:1:p:316-327

DOI: 10.1016/j.ejor.2017.09.010

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