Travel Time derivative with Monte Carlo Method
Subject Areas : Financial engineering
1 - economic and financial institute, housing and urban development, Ministry of road and urban developing institute
Keywords: Pricing, Derivatives, Monte-Carlo Method, Mean Reversion,
Abstract :
Time pricing is a tool for traffic management. Traffic management looks after increasing trip quality by reducing direct and indirect cost (wasting time, air pollution, noise pollution, accident cost and…). So, in this paper, at first, it is implemented financial derivatives for defining travel time derivatives. At the second stage, it is used Monte Carlo method for pricing traffic congestion. Since, derivative pricing fluctuated is an index for predicting deriver behavior in that time or at least their expectation about future traffic volume: low (high) price is likely to be light (heavy) congestion at that time and in the specific route. So, it is an intelligent method that indirectly dependent to drivers’ decision. In addition, in the usual method, the price is fixed, however, in the new method it is used market mechanism, so it is changed. Furthermore, in travel time derivative, two factors, traffic volume and diversion is implied in this forecasting. At the end, the introduced method is run for Karaj-Chalos route at 10 first of 31 July 2017. The derivative determined that the travel time will be 72 minutes. The result shows that, buying opportunity price is more than celling, so the travel time will be less than threshold time 72 minutes
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