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Best, R and Langston, C (2006) Evaluation of construction contractor performance: a critical analysis of some recent research. Construction Management and Economics, 24(04), 439-45.

Cheung, F K T and Skitmore, M (2006) A modified storey enclosure model. Construction Management and Economics, 24(04), 391-405.

Huang, Y-L and Chou, S-P (2006) Valuation of the minimum revenue guarantee and the option to abandon in BOT infrastructure projects. Construction Management and Economics, 24(04), 379-89.

  • Type: Journal Article
  • Keywords: BOT; infrastructure; real option; option to abandon; minimum revenue guarantee
  • ISBN/ISSN: 0144-6193
  • URL: https://doi.org/10.1080/01446190500434997
  • Abstract:

    The real option approach is used to value the minimum revenue guarantee (MRG) and the option to abandon in Build-Operate-Transfer infrastructure projects. The option to abandon is formulated under an investment option held by the concessionaire at contract signing and to expire before construction commencement. MRG is formulated as a series of European style put options in a single option pricing model. When combined with the option to abandon in the pre-construction phase, MRG is reconstructed as a series of European style call options to develop a compound option pricing formula. The Taiwan High-Speed Rail Project is chosen as a numerical case to apply the formulas. The results show both MRG and the option to abandon can create values. When MRG and the option to abandon are combined, they will counteract each other and their values will thus be reduced. Increasing the MRG level will decrease the value of the option to abandon, and, at a certain MRG level, the option to abandon will be rendered worthless.

Johnson, C, Lizarralde, G and Davidson, C H (2006) A systems view of temporary housing projects in post-disaster reconstruction. Construction Management and Economics, 24(04), 367-78.

Stewart, R A and Spencer, C A (2006) Six-sigma as a strategy for process improvement on construction projects: a case study. Construction Management and Economics, 24(04), 339-48.

Tang, C M, Wong, C W Y, Leung, A Y T and Lam, K C (2006) Selection of funding schemes by a borrowing decision model: a Hong Kong case study. Construction Management and Economics, 24(04), 349-65.

Thomas, A V, Kalidindi, S N and Ganesh, L S (2006) Modelling and assessment of critical risks in BOT road projects. Construction Management and Economics, 24(04), 407-24.

Wong, J T Y and Hui, E C M (2006) Construction project risks: further considerations for constructors' pricing in Hong Kong. Construction Management and Economics, 24(04), 425-38.