Research on The Model of Concession Pricing of BOT Project of Sewage Treatment: Based on Real Option and Time Series

Empirical study of sewage treatment projects in Dalian reflects that concession price is a critical factor in the negotiation of BOT (build-operation-transfer) . Aimed to the flaws of the existing models, relevant elements of a contractual package are treated as a form of real option. At the same time, a model called ARMA (an autoregressive-moving average process of order) is used to estimate one key variable of the Black-Scholes model. After calculating, the result is smaller than that calculated by other traditional models. So, using this method, governments´ guarantees or alternative forms are evaluated quantitatively, which means this method strikes a balance between risk and benefit.