A real option approach to determine optimal intervention windows for multi-national rail corridors
In this paper, a real option approach to determine the optimal time to execute interventions on rail infrastructure, when it is not known for certain which intervention is to be executed, is presented (i.e. the optimal intervention window). Such an approach is useful in the management of rail infrastructure that belongs to a multi-national rail corridor where multiple railway organizations, ideally, should coordinate their maintenance interventions, years in advance, to minimize service disruptions. The approach is based on an adaptation of the Black and Scholes differential equation model used to value European call options in financial engineering. It is demonstrated by determining the optimal intervention window for infrastructure in a fictive rail corridor.