(with apologies for cross posting)

Centre for Transport Studies
Imperial College London

PhD Studentship - Real Options in the Appraisal of Climate Change Investments: The Case of Smart Cities
Investments

Over the past four decades, real options theory has emerged as a powerful framework for the valuation
and appraisal of investments in highly risky conditions, and in now used in a number of industries.
However, it has rarely been applied in the context of systemic city investment (e.g., transport or energy
systems) where the public sector plays a key role, and nor has it been linked systematically to the existing
econometric modelling and appraisal methods used in these domains. The overall aim of this project is
therefore to develop a new framework for the application of real options theory to the valuation and
appraisal of smart cities investment propositions, focusing on the transport and energy sectors. The
specific objectives include:

1. To develop the new framework that combines a real options approach to investment uncertainty with a
theoretically coherent to the econometric identification of costs and benefits.

2. To operationalise the framework in the context of one or more practical smart city investments in the
UK, in collaboration with relevant public and private sector partners.

3. To comprehensively evaluate the comparative performance of the conventional and new approach
under a wide range of potential uncertainty scenarios.

The PhD will be funded by the Grantham Institute for Climate Change. The studentship covers home/EU
student fees and a bursary to support living costs for three years and is open to UK and EU candidates, as
well as overseas candidates who would be able to pay the difference between home and overseas fees.

Applicants should hold or expect to obtain a first or upper second class honours degree or equivalent in a
relevant highly quantitative subject, preferably with a background in mathematical economics and/or
stochastic control. The candidate will also require excellent software and programming skills. An interest in
cities and smart technologies would also be advantageous. A Masters degree in a relevant subject is
desirable.

The Centre for Transport Studies is the focus for transport research at Imperial. It comprises a vibrant
community of over 80 academics, post doctoral researchers and doctoral students undertaking research
across a broad range of topics including transport demand modelling, transport policy and regulation,
transport operations, transport and the environment, transport safety, intelligent transport systems,
railway operations and management, air transport operations and control, and maritime logistics. Further
information can be found on the Centre's website at www.imperial.ac.uk/cts.

Background to the research

Cities and the individuals, businesses and institutions located within them face an historically
unprecedented challenge in managing their transition to a low carbon future. Massive capital investment is
required in new city systems and services, with potentially significant rewards available to successful
investors. But these investments must be made in the context of enormous uncertainty surrounding (a)
geopolitical and economic boundary conditions, (b) the potential direct and indirect impacts of climate
change on cities, (c) future technological innovation and behavioural adaptation and (d) the true effects of
the new investments themselves. These considerations particularly affect investments in the raft of new
technologies and services collectively known as smart cities systems. Traditional methods of evaluation
and appraisal, based on concepts of simple temporal discounting of future costs and benefits are widely
regarded as inadequate since they (a) do not correctly take into account the influence of the various
sources of uncertainty affecting the investment decision, (b) do not take account of how future
investments can modify the performance of earlier ones (i.e., the dynamics of investment portfolios) and
(c) do not provide a framework for institutional learning i.e., for the experience in performance of current
investments to influence future decisions.

Applications

Applicants should send an up to date CV including details of their academic record, a covering letter
explaining their motivation and suitability for the topic, and the contact details of two academic referees to
Prof. John Polak, Centre for Transport Studies, Skempton Building, Imperial College London, London SW7
2AZ. E: [log in to unmask]

The closing date for applications is 1 February 2013. Short listing will take place shortly after this date.

--
Prof. John Polak
Chairman, Centre for Transport Studies
Director of Research, Department of Civil and Environmental Engineering
Imperial College London
www.imperial.ac.uk/cts
www.imperial.ac.uk/civilengineering

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