Abstract

One of the lessons learned from Iridium and Globalstar is that market uncertainty must be considered during conceptual design. Rather than designing such systems for a fixed capacity one should consider a "staged deployment" approach. By embedding real options in the design (e.g. carry extra propellant for maneuvering) one gives managers the flexibility to grow system capacity in stages if market demand warrants it. This unit shows how demand uncertainty can be modeled and how Real Options Analysis can be used to identify system evolution

paths that can reduce economic risks of deploying large capital intensive systems. Staged deployment of satellite constellations will also require some amount of on-orbit reconfiguration. This approach marks a significant departure from traditional engineering practice and is also applicable to other types of engineering systems.

Learning Objectives

After completing this unit you should be able to:

Apply uncertainty modeling based on Geometric Brownian Motion (GBM) and lattice (binomial) approaches to demand uncertainty in satellite constellations.

Quantify the benefits in terms of risk reduction for deploying large, capital investment systems in stages.

Find architectural evolution paths for a system, based on the trade space analysis you performed in Unit 2.

Disclaimer Statement: The material in this industry systems study was created for educational purposes only. In no way do the statements made in this study express official positions of the Massachusetts Institute of Technology. The material may not be used for any purpose other than classroom or distance learning instruction. Copyright © 2003 M.I.T.- Engineering Systems Learning Center.

Author Information: Prof. Olivier de Weck (deweck@mit.edu), Room 33-410, Darren Chang (darrenz@mit.edu) , Massachusetts Institute of Technology, 77 Massachusetts Ave, Cambridge, MA 02139, USA

Materials

Unit Material

- Unit 4: Lecture slides (unit4_lecture.ppt)

- Paper: de Weck, O.L., de Neufville R. and Chaize M., “Staged Deployment of Communications Satellite Constellations in Low Earth Orbit”, Journal of Aerospace Computing, Information, and Communication, 1, 119-136 , March 2004

- de Weck, O., de Neufville, R., Chaize M., “Enhancing the Economics of Communication Satellites via Staged Deployment and Orbital Reconfiguration”, Paper AIAA-2003-6317, AIAA Space 2003 Conference and Exhibition, Long Beach, California, 23-25 September 2003

- Real Options and Staged Deployment Simulation Code (ROA.zip)

- Real Options and Staged Deployment Simulation Code – User Manual (Memo.doc)