0
  • DE
  • EN
  • FR
  • International Database and Gallery of Structures

Advertisement

Valuation of Guaranteed Maximum Price Contracts in Korea Using the Collar Option Model

Author(s):


Medium: journal article
Language(s): English
Published in: Advances in Civil Engineering, , v. 2018
Page(s): 1-9
DOI: 10.1155/2018/2989343
Abstract:

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.

Copyright: © 2018 Sanghyo Lee et al.
License:

This creative work has been published under the Creative Commons Attribution 4.0 International (CC-BY 4.0) license which allows copying, and redistribution as well as adaptation of the original work provided appropriate credit is given to the original author and the conditions of the license are met.

  • About this
    data sheet
  • Reference-ID
    10218450
  • Published on:
    28/11/2018
  • Last updated on:
    02/06/2021
 
Structurae cooperates with
International Association for Bridge and Structural Engineering (IABSE)
e-mosty Magazine
e-BrIM Magazine