Reducing Risk Through Real Options in Systems Design: The Case of Architecting a Maritime Domain Protection System

  title={Reducing Risk Through Real Options in Systems Design: The Case of Architecting a Maritime Domain Protection System},
  author={Joost Buurman and Stephen X. Zhang and Vladan Babovic},
  journal={Risk Analysis},
Complex engineering systems are usually designed to last for many years. Such systems will face many uncertainties in the future. Hence the design and deployment of these systems should not be based on a single scenario, but should incorporate flexibility. Flexibility can be incorporated in system architectures in the form of options that can be exercised in the future when new information is available. Incorporating flexibility comes, however, at a cost. To evaluate if this cost is worth the… 

Using Real Options in the Optimal Design of Water Distribution Networks

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An approach for analyzing and managing flexibility in engineering systems design based on decision rules and multistage stochastic programming

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Long-term adaption decisions via fully and partially observable Markov decision processes

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For sustainable defense management, it is essential to acquire weapons systems that can adapt to future uncertain threats and, at the same time, to invest efficiently with limited budgets. Economic

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Valuation of Capabilities and System Architectural options to Meet Affordability Requirement

Abstract : Weapon systems are designed for very long operational lives, which exposes them to risks of technological and operational obsolescence that can greatly shorten their expected operational



Value-at-risk analysis for real options in complex engineered systems

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Design of Engineering Systems under Uncertainty via Real Options and Heuristic Optimization

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Building Real Options into Physical Systems with Stochastic Mixed-Integer Programming

A framework for exploring real options in physical systems that uses stochastic mixed-integer programming to manage the path-dependency and interdependency features and enables the analyst to include more technical details and develop explicit plans for the execution of projects according to the contingencies that arise.

Architecting/Designing Engineering Systems Using Real Options

It is suggested that the methods of “options analysis”-that have revolutionized thinking about investments -can provide a conceptual basis for defining optimal configurations and provide a clear rationale for when to design specific types of flexibility into the system.

An Integrated Systems Architecture to Provide Maritime Domain Protection

The focus of this research is to address the criticality and vulnerability of commercial shipping in the Straits of Mallacca by designing and evaluating competing systems architectures that could

9.1.3 Screening for Real Options “In” an Engineering System: A Step Towards Flexible System Development

The goal of this research is to develop an analytical framework for screening for real options “in” an engineering system. Real options is defined in the finance literature as the right, but not the

Dynamic strategic planning for technology policy

The principles of Dynamic Strategic Planning are described, specific methods that are effective for carrying them out are indicated, and their use through application to the formulation of policy on low-emission automobiles in the United States is illustrated.

NASA technology assessment using real options valuation

A set of computational procedures that quantifies the option value of each technology in the context of prioritizing advanced technologies for NASA funding and illustrates the detailed calculations using one of them—lightweight propellant tank technology.

A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investments

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Real Options by Spreadsheet: Parking Garage Case Example

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