IDEAS home Printed from https://ideas.repec.org/a/taf/conmgt/v28y2010i10p1057-1069.html
   My bibliography  Save this article

Collar options to manage revenue risks in real toll public-private partnership transportation projects

Author

Listed:
  • Liang Shan
  • Michael Garvin
  • Raman Kumar

Abstract

The revenue risk is of great importance to ensure the success of a real toll public-private partnership (PPP) transportation project. Past research has proposed a revenue guarantee put option as an alternative way to quantify and potentially manage this risk. A practical, or commercial, limitation of this type of option is its requirement for an upfront premium payment, and a concessionaire is likely to shy away from additional monetary requirements. A collar option, which is a combination of a put and call option, not only overcomes this barrier but it also provides other benefits. Modifications to the basic collar's structure can redistribute downside losses and upside profits to fulfil stakeholders' needs and thus improve the effectiveness of risk management. The terms, applicability and limitations of a collar option are discussed, and a numerical example is developed to illustrate how to determine the strike prices of a collar option.

Suggested Citation

  • Liang Shan & Michael Garvin & Raman Kumar, 2010. "Collar options to manage revenue risks in real toll public-private partnership transportation projects," Construction Management and Economics, Taylor & Francis Journals, vol. 28(10), pages 1057-1069.
    • Handle: RePEc:taf:conmgt:v:28:y:2010:i:10:p:1057-1069
    DOI: 10.1080/01446193.2010.506645
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/01446193.2010.506645
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/01446193.2010.506645?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abraham Park & Chen Yu Chang, 2013. "Impacts of Construction Events on the Project Equity Value of the Channel Tunnel Project," ERES eres2013_97, European Real Estate Society (ERES).
    2. Marzouk, Mohamed & Ali, Mohamed, 2018. "Mitigating risks in wastewater treatment plant PPPs using minimum revenue guarantee and real options," Utilities Policy, Elsevier, vol. 53(C), pages 121-133.
    3. Ales S. Berk & Dejan Podhraski, 2018. "Superiority of Monte Carlo simulation in valuing real options within public–private partnerships," Risk Management, Palgrave Macmillan, vol. 20(1), pages 1-28, February.
    4. Silaghi, Florina & Sarkar, Sudipto, 2021. "Agency problems in public-private partnerships investment projects," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1174-1191.
    5. Sanghyo Lee & Kyunghwan Kim, 2015. "Collar Option Model for Managing the Cost Overrun Caused by Change Orders," Sustainability, MDPI, vol. 7(8), pages 1-15, August.
    6. Fedorov, Semyon & Lavrutich, Maria & Hagspiel, Verena & Lerdahl, Thomas, 2022. "Risk and benefit sharing schemes in oil exploration and production," Energy Economics, Elsevier, vol. 116(C).
    7. Taeil Park & Byungil Kim & Hyoungkwan Kim, 2012. "Impact of Deterioration and Negotiation on Sewer System O&M Contracts from the Real Option Perspective," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(10), pages 2973-2989, August.
    8. Xinhua Mao & Jiahua Gan & Xilong Zhao, 2019. "Debt Risk Evaluation of Toll Freeways in Mainland China Using the Grey Approach," Sustainability, MDPI, vol. 11(5), pages 1-17, March.
    9. Carlos Andrés Zapata Quimbayo, 2020. "OPCIONES REALES Una guía teórico-práctica para la valoración de inversiones bajo incertidumbre mediante modelos en tiempo discreto y simulación de Monte Carlo," Books, Universidad Externado de Colombia, Facultad de Finanzas, Gobierno y Relaciones Internacionales, number 138, August.
    10. Sanghyo Lee & Sungho Tae & Sungwoo Shin, 2015. "Profit Distribution in Guaranteed Savings Contracts: Determination Based on the Collar Option Model," Sustainability, MDPI, vol. 7(12), pages 1-17, December.
    11. Carlos Contreras & Julio Angulo, 2017. "Valuing Governmental Support in Road PPPs," Hacienda Pública Española / Review of Public Economics, IEF, vol. 223(4), pages 37-66, December.
    12. Adkins, Roger & Paxson, Dean & Pereira, Paulo J. & Rodrigues, Artur, 2019. "Investment decisions with finite-lived collars," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 185-204.
    13. Antonella Lomoro & Giorgio Mossa & Roberta Pellegrino & Luigi Ranieri, 2020. "Optimizing Risk Allocation in Public-Private Partnership Projects by Project Finance Contracts. The Case of Put-or-Pay Contract for Stranded Posidonia Disposal in the Municipality of Bari," Sustainability, MDPI, vol. 12(3), pages 1-18, January.
    14. Khwaja Mateen Mazher & Albert P. C. Chan & Rafiq M. Choudhry & Hafiz Zahoor & David J. Edwards & Ahmed M. Ghaithan & Awsan Mohammed & Mubashir Aziz, 2022. "Identifying Measures of Effective Risk Management for Public–Private Partnership Infrastructure Projects in Developing Countries," Sustainability, MDPI, vol. 14(21), pages 1-19, October.
    15. Haoyang Song & Jianhua Hou & Shiqi Tang, 2021. "From Contractual Flexibility to Contractor’s Cooperative Behavior in Construction Projects: The Multiple Mediation Effects of Ongoing Trust and Justice Perception," Sustainability, MDPI, vol. 13(24), pages 1-21, December.
    16. Babatunde, Solomon Olusola & Perera, Srinath, 2017. "Analysis of traffic revenue risk factors in BOT road projects in developing countries," Transport Policy, Elsevier, vol. 56(C), pages 41-49.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:conmgt:v:28:y:2010:i:10:p:1057-1069. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RCME20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.