Many large infrastructure projects are subject to considerable uncertainty over their revenue streams which makes their valuations particularly challenging. When project scalability can be altered as new information is revealed over the course of a project’s lifecycle, the presence of uncertainty can, in fact, provide option values that are ignored with static Net Present Value (NPV) analyses. To achieve these benefits, however, a better understanding of volatility is of the essence. This dissertation seeks to demonstrate how a better understanding of the business risks could facilitate the valuation of flexibility options in investment timing and engineering design. It also details how the need to acquire such options may vary across different contexts (i.e., among airports of different sizes and different pavement types). The dissertation first demonstrates the mechanics of this complex concept by applying it to the simpler problem of volatility in airport pavement materials using the alternate design/alternative bid (ADAB) process common in highway construction. The research then proceeds to fully develop the approach for application to airport expansion projects. The results contribute to a better understanding of volatility of airport activity in US airports by relating option values to airports’ concentration risk in their connecting traffic volumes. Finally, the presence of any stationarity behavior in airport capacity utilization levels is examined to test the existence of a constant mean and variance in the long run, which may assist the forecasting efforts associated with airport expansion projects. The major contribution of the dissertation is the explicit formulation of an equation for airport activity levels, which relates changes (hereafter termed “jumps”) in passenger enplanements to the valuation of airport expansions.