Evaluating Alternative Operations Strategies to Improve Travel Time Reliability (2013) / Chapter Skim
Currently Skimming:
Pages 108-135
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 108... ...
108 Appendix B presents an approach for determining the economic benefits of improving travel time reliability under recurring-event scenarios. In this approach, uncertainty arising from recurring events is converted to a certainty-equivalent measure so that conventional evaluation methods can be used to place a value on the cost of unreliability.
|
From page 109... ...
109 sections following. These include measuring the value of reliability, valuing reliability for recurring events, measuring networkwide impacts, quantifying the value of time, and applying the methodology.
|
From page 110... ...
110 Practitioners and experts in the real-options branch of financial analysis have a very specific meaning for "real option." Usually, the term refers to real assets in the capital budget context. Because it is not known that anyone else has studied travel time reliability by using the options approach, it is not clear what is the proper terminology to use.
|
From page 111... ...
111 uncertainty can be abstracted from to facilitate valuing the unreliability of a road system. Specifically, the real option formulation allows for answering the question posed above with a certainty-equivalent delay, which can be converted to additional travel time per mile.
|
From page 112... ...
112 a lognormal distribution, while the stochastic nature of rare events necessitates adapting the more traditional options formula. For rare events, an application of stochastic variables displaying a generalized extreme value distribution has been adopted and is presented in Appendix C
|
From page 113... ...
113 I = the guaranteed speed, in mph r = the annualized, risk-free continuously compounded interest rate s = variability of V; square root of the log-value variation process of V T - t = option length in years, where T is the expiration date of the option Equation B.1 illustrates how the travel time reliability option can be formulated by following standard insurance options formulations, that is, recasting an insurance option as a "speed guarantee insurance" policy. From the mathematics of the underlying options theory, we know that (all other things being equal)
|
From page 114... ...
114 average speed, log average speed, and the standard deviation are calculated from observed speed data. The option value (mph)
|
From page 115... ...
115 and where P(I, ∞) = the value of the perpetual American put option in mph, as a function of the speed guarantee V = the (unknown)
|
From page 116... ...
116 the lognormal speed distribution must then be estimated in a manner consistent with this long-lived option (i.e., using long histories of the morning commuting speeds)
|
From page 117... ...
117 its surrounding economic conditions. Hence, for short-life options, short-term interest rates (expressed on a per annum basis)
|
From page 118... ...
118 help to characterize the stochastic nature of future system performance. Valuing Reliability for Rare Events Although a sufficiently long time series of high-resolution traffic performance data (e.g., highway speeds)
|
From page 119... ...
119 has incorporated link-level augmentations to allow measurement of unreliability effects. Although it is applied only to freeway links (with a representative stochastic rendering for all links)
|
From page 120... ...
120 RP data from HOT-lane facilities have also been used to improve SP survey instruments and vice versa. As a result, researchers can create scenarios reflecting realistic trip alternatives, thereby reducing measurement errors from respondent perceptions of scenarios that are familiar to them.
|
From page 121... ...
121 et al.
|
From page 122... ...
122 the value of time.) The cost-based approach produces moreconservative estimates because the value of time includes only the costs of driver time and inventory (also sometimes the time-based vehicle depreciation cost)
|
From page 123... ...
123 Guidance and Recommended Rates This section describes the U.S. DOT Departmental Guidance on the Valuation of Travel Time in Economic Analysis (1997b)
|
From page 124... ...
124 The U.S. DOT guidance on the value of time is given as a percentage of the wage rate per person-hour.
|
From page 125... ...
125 state DOTs, regional MPOs, or the 2008 National Household Travel Survey are other sources for determining the volume by user group or by trip purpose. Applying the Methodology With the options theoretic approach, the costs of unreliability or the benefits of potential reliability improvement strategies can be assessed.
|
From page 126... ...
126 Comparison of Methodologies for Valuation of Travel Time Reliability The options theoretic approach is a new approach for the valuation of travel time reliability. The typical approaches to the valuation of travel time reliability are based on discrete choice models that use SP or RP data.
|
From page 127... ...
127 Small et al. model yielded a value of unreliability of $19.56 per hour.
|
From page 128... ...
128 an approach for the valuation of travel time reliability for rare events, and as an approach for optimal investment decision making, given the uncertainty related to low-probability, high-consequence events. Summary of Reviewer Comments and Responses Comment 1 One can create many different classification schemes within the field of options and financial derivatives.
|
From page 129... ...
129 commonly used when considering money because this range is close to the historical interest rates people could get by putting their money in something like a bank account with guaranteed interest rate. However, it is not clear how to justify the assumption that the travel speed will grow at any rate with certainty over T - t time along the target road segment.
|
From page 130... ...
130 security when the option matures. While the two contracts are similar in some aspects, they are priced in different ways using very different paradigms.
|
From page 131... ...
131 methodology will yield appropriate values for probabilities of travel times will require a lot of empirical research and comparison with methodologies currently applied elsewhere in the world (Norway, the Netherlands, United Kingdom, etc.)
|
From page 132... ...
132 Recurring-event Reliability Valuation example Issue The transportation agency oversees a stretch of highway that experiences significant and variable congestion in the a.m. peak period (6:00 a.m.–10:00 a.m.)
|
From page 133... ...
133 Note: NB = northbound. Figure B.5.
|
From page 134... ...
134 Step 2e The new average speed at which the commuter is willing to travel if unreliability is eliminated = 32.67 - 4.71 = 27.96 mph. • Time to cover 1 mile at old average speed 1 32.67 = × 60 minutes.
|
From page 135... ...
135 Value of reliability improvement • Single-occupancy vehicles = 11,484 × 0.30 × (0.31 - 0.14) = $585.68 per mile.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.