Default and Abandonment Option in Motorway Concessions

Cabero Colín, Fernando and Sánchez Soliño, Antonio and Lara Galera, Antonio Lorenzo (2017). Default and Abandonment Option in Motorway Concessions. "Journal of Infrastructure Systems", v. 23 (n. 1); pp. 1-9. ISSN 1943-555X.


Title: Default and Abandonment Option in Motorway Concessions
  • Cabero Colín, Fernando
  • Sánchez Soliño, Antonio
  • Lara Galera, Antonio Lorenzo
Item Type: Article
Título de Revista/Publicación: Journal of Infrastructure Systems
Date: March 2017
ISSN: 1943-555X
Volume: 23
Freetext Keywords: Real Option, Guarantee, Uncertainty, Motorway, Concession, Default
Faculty: E.T.S.I. Caminos, Canales y Puertos (UPM)
Department: Ingeniería Civil: Construcción
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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As long as motorway concessions are subject to the variability of traffic demand, it is necessary to apply valuation methods that can take into account that uncertainty. In the past, many concession projects have faced an early termination of the contract due to lower traffic than expected. These insolvency situations raise the issue of the compensation to the concessionaire when the contract is prematurely terminated. A methodology based on the real-options approach has been developed in this paper to assess insolvency situations in motorway concessions. Under this approach, the mechanism of compensation can be modeled as an abandonment option, granted by the public administration to the concessionaire, in which the value of the option will depend on the evolution of traffic. This methodology is then applied to the case of a real concession in Spain. The results show a significant value of the abandonment option, which represents an implicit aid from the public administration to the concession. In this way, the methodology presented in this paper can contribute to gaining a better understanding of the risks of motorway concessions and enhancing the transparency in concession contracts.

More information

Item ID: 49941
DC Identifier:
OAI Identifier:
DOI: 10.1061/(ASCE)IS.1943-555X.0000309
Official URL:
Deposited by: Memoria Investigacion
Deposited on: 05 Apr 2018 17:21
Last Modified: 25 Mar 2019 09:34
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