Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model
Joint Authors
Lee, Sanghyo
Ahn, Yong Han
Jang, Hyeongjae
Source
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-9, 9 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-10-29
Country of Publication
Egypt
No. of Pages
9
Main Subjects
Abstract EN
This study assessed the levels of risk that contractors may be subject to while executing a GMP contract by applying a collar option model to the case study of an apartment project in Korea and identified implications for the application of GMP contracts in Korea.
The payoff structure of the GMP contract was defined based on the collar option model and a profit sharing ratio calculated to evaluate the risks involved in GMP contracts.
The results showed that an increase in the GMP and a decrease in the expected cost and cost range were accompanied by a decrease in the profit sharing ratio.
The proposed valuation model for GMP contracts is expected to help clients and contractors in Korea negotiate reasonable contracts as it enables the contractor to utilize the proposed model as basic data, the client to evaluate the performance of the contractor, and both parties to agree a reasonable profit sharing ratio.
Implementing GMP contracts with CMR is likely to have a number of positive effects on the Korean construction market.
However, in order to maximize these effects, it is necessary to have the ability to evaluate cost uncertainty.
Accordingly, it is very important to analyze the factors that influence cost volatility.
In future work, the various factors that have an impact on the GMP must be studied to maximize the positive effects of the framework proposed in this paper.
An analysis of the effect of each factor on the change in the GMP will help Korean construction companies who are attempting to introduce GMP contracts to perform their preconstruction services effectively.
American Psychological Association (APA)
Lee, Sanghyo& Jang, Hyeongjae& Ahn, Yong Han. 2018. Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model. Advances in Civil Engineering،Vol. 2018, no. 2018, pp.1-9.
https://search.emarefa.net/detail/BIM-1115760
Modern Language Association (MLA)
Lee, Sanghyo…[et al.]. Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model. Advances in Civil Engineering No. 2018 (2018), pp.1-9.
https://search.emarefa.net/detail/BIM-1115760
American Medical Association (AMA)
Lee, Sanghyo& Jang, Hyeongjae& Ahn, Yong Han. Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model. Advances in Civil Engineering. 2018. Vol. 2018, no. 2018, pp.1-9.
https://search.emarefa.net/detail/BIM-1115760
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1115760