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

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  • Ansaripoor, Amir H.
  • Oliveira, Fernando S.

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.

Suggested Citation

  • Ansaripoor, Amir H. & Oliveira, Fernando S., 2018. "Flexible lease contracts in the fleet replacement problem with alternative fuel vehicles: A real-options approach," European Journal of Operational Research, Elsevier, vol. 266(1), pages 316-327.
    • Handle: RePEc:eee:ejores:v:266:y:2018:i:1:p:316-327
    DOI: 10.1016/j.ejor.2017.09.010
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