Compound Options in Build–Operate–Transfer Projects with Default Risk for Highways in Taiwan

Yu Lin Huang; Ching Hsiang Hsieh

doi:10.1007/s40030-019-00392-w

Compound Options in Build–Operate–Transfer Projects with Default Risk for Highways in Taiwan

Yu Lin Huang, Ching Hsiang Hsieh^*

^*Corresponding author for this work

Department of Civil Engineering

Research output: Contribution to journal › Article › peer-review

Abstract

This study proposes a model for appraising the overall contract price of build–operate–transfer (BOT) projects with default risk in public works construction situations. The contract is assumed to have been terminated during its implementation period; then, this assumption is used to estimate the final simulated default situation and to calculate the BOT option price. Taiwan’s highway expansion project is used for an actual appraisal, analysing the project sensitivity and default price. A numerical solution is obtained using the Monte Carlo simulation method.

Original language	English
Pages (from-to)	569-574
Number of pages	6
Journal	Journal of The Institution of Engineers (India): Series A
Volume	100
Issue number	4
DOIs	https://doi.org/10.1007/s40030-019-00392-w
State	Published - 1 Dec 2019

Keywords

Build–operate–transfer
Compound options
Default
Highway

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10.1007/s40030-019-00392-w

Cite this

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abstract = "This study proposes a model for appraising the overall contract price of build–operate–transfer (BOT) projects with default risk in public works construction situations. The contract is assumed to have been terminated during its implementation period; then, this assumption is used to estimate the final simulated default situation and to calculate the BOT option price. Taiwan{\textquoteright}s highway expansion project is used for an actual appraisal, analysing the project sensitivity and default price. A numerical solution is obtained using the Monte Carlo simulation method.",

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AB - This study proposes a model for appraising the overall contract price of build–operate–transfer (BOT) projects with default risk in public works construction situations. The contract is assumed to have been terminated during its implementation period; then, this assumption is used to estimate the final simulated default situation and to calculate the BOT option price. Taiwan’s highway expansion project is used for an actual appraisal, analysing the project sensitivity and default price. A numerical solution is obtained using the Monte Carlo simulation method.

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KW - Default

KW - Highway

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ER -

Compound Options in Build–Operate–Transfer Projects with Default Risk for Highways in Taiwan

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