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.
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