Early Abandonment of a Motorway Concession Contract. Value of the Abandonment Option and Probability of Abandonment under the Real Options Framework

This article uses a real options framework to determine value of the abandonment option and the probability of abandonment of transportation-related infrastructure projects. The authors note that investments in transport infrastructure projects, and specifically in toll motorway concessions, are associated with a high degree of uncertainty and require a large amount of resources. The authors apply the options theory to the specific case of the abandonment option in a toll motorway concession project. For this purpose, the traffic of the motorway has been considered as the underlying asset to carry out a valuation based on the analogy with the financial options. This methodology is then applied to a case study of a real concession in Madrid, Spain. The authors conclude that their results show a significant value of the abandonment option that represents an implicit and unintended aid from the Public Administration to the project.

Language

  • English

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Filing Info

  • Accession Number: 01623727
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jan 25 2017 3:08PM