Research On The Evaluation Of The China Inner Financed Bot Of Highway Project Based On The Real Option

The research object of the paper is the investment decision problems of China inner financial BOT highway construction projects. Based on some cases of domestic BOT highway projects, this paper analysis the domestic BOT highway real option characteristics, and studies the investment value of inner financial BOT highway construction projects.Analysis of inner financial BOT highway projects indicates that the value of real options includes:delay option value, option value caused by investment cost, traffic flow and the option value brought by the government guarantee. The values of delay option come from two factors:one source is the delay period from the bidding to start building brought by the BOT construction project itself.The other source is due to potential income bringing by the BOT concession period mode. Paper further uses real option theory to evaluate those three different types of real option value:1. We use the fuzzy real option model to evaluate the impact to the investment value of the inner financial BOT highway projects by two key risk factors that were the total cost of the infrastructure construction and projects operating income. The model approach can help investors better understand the potential investment value of projects from a better grasp of the overall investment opportunities.2. Paper analyzes the delay option value of. inner financial BOT highway projects. Based on the model established by Mcdonald &Siegel (1986) and Andrew&Dixit (1996), we study the delay option value combining the delay characteristics of inner financial BOT highway projects. Research shows that the phenomenon of delayed investment existed widespread after the BOT highway concession tender in domestic. This delay will increase the investment value of the project. In addition, we analyze the value of potential income from the real option angle combining the BOT concession period mold of single-limit and no incentive. Consider the nature of path dependence of the delay option (American option), we calculate the option value using the least square Monte Carlo simulation method (LSM) which proposed by Longstaff & Schwartz(2001).3. Paper discusses the option value option value brought by the government guarantee of the inner financial BOT highway projects. A government guaranteed level of minimum revenue can increase the value of investment projects and reduce operational risks of the project. The government made commitments to ensure the lowest part of the risk investment, so the government can restrict the proceeds of BOT highway to get some income. This kind bilateral guarantee can make the level of investment income on a reasonable level. Thesis establishes the American options measurement model of two types of government guarantee:bilateral guarantee and unilateral guarantee. Furthermore, in the actual case study, we designed a bilateral program including the government guarantee and government restriction base on a benchmark traffic flows. We use the Monte Carlo simulation method simulation to calculate the value of the real options under the two conditions. From real options perspective, through the BOT highway bilateral guarantee the government access to two real options value:a put option value and a call option value. When the restrictions ratio the guarantee ratio equal, the sum of the government potential expenditures (put option value) and potential receipts (call option value) is positive. At this time the bilateral guaranteed makes government to get a positive value. By changing the restrictions ratio the guarantee ratio, it can make the risks and benefits have a reasonable allocation between the government and the project company. The value of this ratio depends on the concession contract negotiation between the project company and the government. In other words, it depends on both level of understanding the risk of the investment project and both attitudes toward risk.