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

Research output: Contribution to journalArticle

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 languageEnglish
Pages (from-to)569-574
Number of pages6
JournalJournal of The Institution of Engineers (India): Series A
Volume100
Issue number4
DOIs
StatePublished - 1 Dec 2019

Keywords

  • Build–operate–transfer
  • Compound options
  • Default
  • Highway

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