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Quantification of Operational Flexibility in Wastewater Treatment Projects

In: New Perspectives in Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Marta Biancardi

    (University of Bari, Department of Economics and Finance)

  • Antonio Di Bari

    (University of Campania, Department of Economics)

  • Giovanni Villani

    (University of Bari, Department of Economics and Finance)

Abstract

Today, wastewater treatment projects are very important to preserve human health and the terrestrial and aquatic ecosystems. The valuation of these projects presents some difficulties related to the uncertainty of wastewater flows over time and the operational flexibilities that influences their performance. This paper aims to provide a valuation methodology of wastewater treatment projects that can consider the stochastic nature of the wastewater volume, the operational flexibility to expand the project, and the possibility of turning off the system when the wastewater volume is too low to avoid financial losses. To pursue this goal, we apply a Real Options Approach (ROA) fitted for the characteristics of the wastewater volume in an agricultural firm, such as its evolution through a standard Brownian motion to which it is applied a seasonality component referred to the availability of fruits and vegetables in certain months. We also propose a case study related to a wastewater treatment project carried out by the Rosso Gargano Company in southern Italy.

Suggested Citation

  • Marta Biancardi & Antonio Di Bari & Giovanni Villani, 2025. "Quantification of Operational Flexibility in Wastewater Treatment Projects," Springer Books, in: Michele La Rocca & Massimiliano Menzietti & Cira Perna & Marilena Sibillo (ed.), New Perspectives in Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 50-60, Springer.
    • Handle: RePEc:spr:sprchp:978-3-032-05551-4_5
    DOI: 10.1007/978-3-032-05551-4_5
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