Evaluating Alternative Operations Strategies to Improve Travel Time ...

SHRP 2 L11: Final Appendices
Equation 1 - Speed Guarantee for Recurring Events
To implement the option, we need to provide the inputs listed in Equation 1.
In the examples presented below, the following features of the option are used:
• The log-mean and log-standard deviations of speed are derived from data on segment
speeds for a five-minute time-of-day interval, using a year of daily speed observations.
• The interest rate is set to a riskless, short-term interest rate.
• The guaranteed or “insured” speed is set to the average, historical speed.
• The option length is set to the time (in years) that it takes to traverse the segment at the
lowest speed observed in the historical data.
Figure B.2 illustrates the log-normal distribution of speed for a five-minute interval in the a.m.
peak period using data from the Puget Sound Region for a one-year period.
Figure B.2 - Illustration of a Log-Normal Distribution of Speed
DETERMINING THE ECONOMIC BENEFITS OF IMPROVING TRAVEL-TIME RELIABILITY Page B-11