Research On The Construction Timing Of High-speed Railway Project Based On Real Option

China has become the country with the longest operating mileage and the largest scale of HSR in the world.Corresponding to its remarkable benefits,HSR,as a transportation infrastructure,has the characteristics of great difficulty in construction,long construction period and huge investment.Most of China’s new HSR projects failed to achieve the expected initial financial and economic performance,resulting in heavy debt.In some underdeveloped areas,premature construction may aggravate the debt problem of HSR,and face heavy pressure of loan repayment and operation subsidies.If a more comprehensive assessment can be carried out before investing in HSR,including the timing of construction would greatly improve the reliability of the investment.Due to the long construction and operation period of HSR projects,there are great uncertainties in both costs and benefits as time goes by.The traditional NPV method avoids these uncertainties,lacks the dynamic perspective of investment,neglects the decision-makers’ control of construction timing,and these problems can be solved by introducing Real Option.Real Options can be defined as the ability to make investment actions at a given cost and bring expected net income in the future.The decision maker with investment opportunity is similar to holding a financial call option.When the decision maker makes irreversible investment expenditure,it is equivalent to that he "exercises" the call option.The application of Real Options to study the construction timing of HSR focuses on identifying the types of options,modeling the uncertain factors in the project and determining the solution method.This paper first identifies the options types in the investment decision-making of HSR projects: there are defer options and growth options in the planning and construction stage;expand options,switch options and abandon options exist in the operation stage.This paper takes the construction timing as the research topic,so it focuses on the defer option in the planning and design of HSR project.Under the background that most regions in China are in the stage of economic growth and the transportation demand along the planned HSR line continues to grow,the construction timing of HSR is similar to the American call option.In order to solve the defer option of HSR project,this paper analyzes the construction cost,passenger flow and VOT,which are the main uncertainty factors involved.The construction cost generally presents an upward trend,so this paper assumes that it increases at a fixed proportion every year.The passenger flow is the most important factor affecting the operating benefit,and the uncertainty of its predicted value increases with time.This paper assumes that the passenger flow changes conform to the Geometric Brownian Motion of corresponding drift rate and volatility,and the mathematical system of stochastic analysis behind Black-Scholes option pricing formula is used in the modeling process.VOT changes with economic development,and it is assumed that they change in the same direction and in the same proportion as per capita income.The simulation method is chosen to solve the construction timing.In this paper,the HSR Project A in western China is selected for empirical analysis.Project A is located in the northwest,with high investment,small traffic volume and difficulty in investment recovery.It is typical as a case study.This paper defines the cost-benefit analysis structure,and takes into account construction cost,operation cost,operation income and travel time saving benefit.Through cost-benefit analysis,the net present value of traditional economic evaluation method is obtained.Then,the real option model of a HSR project construction timing is established,and the Crystal Ball software is used to solve the optimal construction timing and carry out sensitivity analysis.The results show that Project A will reach the optimal net present value if the construction is delayed for 18 years.This paper suggests that the construction timing should be included in the comprehensive evaluation system of HSR construction.