Alternative Project Management Practices in Earned Value and Black-Scholes

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Copyright: Zhang, Xinlei
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Abstract
This thesis discusses alternatives to two project management techniques, the earned value approach for project performance reporting and the deterministic discounted cash flow analysis in decision making. Both are criticised in the literature due to their inherent deficiencies and inapplicability in practice. Earned value, a popular tool for forecasting project cost and schedules, has been criticised for its problematic formulation and implementation. These deficiencies are implicit in the method. The first section of the thesis presents a substitute for the earned value approach. The thesis argues that the state- space analysis is a viable alternative to the earned value approach by demonstrating the connection and the differences between the state space and the earned value methods. An example is taken to illustrate how the state space method works in practice. The second section of this thesis presents a new method, the second order moment approach, for option valuation at the investment decision stage. For the purpose of demonstrating the validity of the proposed method for valuing real options, a comparison in both formulation and calculation supports the equivalence between the second order moment and the Black-Sholes approach. Numerical testing then displays this equivalence. Finally, a mathematical method is proposed based on the second order moment approach and the project evaluation and review technique to support infrastructure investment decision making under climate change.
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Author(s)
Zhang, Xinlei
Supervisor(s)
Carmichael, David
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Publication Year
2012
Resource Type
Thesis
Degree Type
Masters Thesis
UNSW Faculty
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