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Pricing Final Indemnification Payments to Private Sponsors in Project-Financed Public-Private Partnerships: An Application of Real Options Valuation


  • Stefano Caselli
  • Stefano Gatti
  • Antonio Marciante


The extraordinary global growth in the private funding of public infrastructure projects in the form of public-private partnerships (or PPPs) is expected to have major social and economic benefits-benefits that result in large part from improving the allocation of project risks between the public and private sectors. But with the financial crisis and severe tightening of credit likely to limit the financing and delivery of new projects, both project participants and their financiers need to manage the technical, economic, legal, and political complexities of infrastructure projects more carefully, especially in less traditional infrastructure deals that involve complex operations, new assets, or emerging markets. Copyright Copyright (c) 2009 Morgan Stanley.

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  • Stefano Caselli & Stefano Gatti & Antonio Marciante, 2009. "Pricing Final Indemnification Payments to Private Sponsors in Project-Financed Public-Private Partnerships: An Application of Real Options Valuation," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(3), pages 95-106.
  • Handle: RePEc:bla:jacrfn:v:21:y:2009:i:3:p:95-106

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    References listed on IDEAS

    1. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," Journal of Finance, American Finance Association, vol. 59(6), pages 2451-2487, December.
    2. Huizinga, Harry & Laeven, Luc & Nicodeme, Gaetan, 2008. "Capital structure and international debt shifting," Journal of Financial Economics, Elsevier, vol. 88(1), pages 80-118, April.
    3. Chowdhry, Bhagwan & Coval, Joshua D., 1998. "Internal financing of multinational subsidiaries: Debt vs. equity1," Journal of Corporate Finance, Elsevier, vol. 4(1), pages 87-106, March.
    4. Stephen L. Curtis, 2008. "Transfer Pricing for Corporate Treasury in the Multinational Enterprise," Journal of Applied Corporate Finance, Morgan Stanley, vol. 20(2), pages 97-112.
    5. Alan C Shapiro, 1984. "The Impact of Taxation on the Currency-of-Denomination Decision for Long-Term Foreign Borrowing and Lending," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 15(1), pages 15-25, March.
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    Cited by:

    1. João Adelino Ribeiro & Paulo Jorge Pereira & Elísio Brandão, 2013. "A Two-Factor Uncertainty Model to Determine the Optimal Contractual Penalty for a Build-Own-Transfer Project," CEF.UP Working Papers 1308, Universidade do Porto, Faculdade de Economia do Porto.
    2. Gabriel J Power & Charli D. Tandja M. & Josée Bastien & Philippe Grégoire, 2015. "Measuring infrastructure investment option value," Journal of Risk Finance, Emerald Group Publishing, vol. 16(1), pages 49-72, January.
    3. Vecchi, Veronica & Hellowell, Mark & Gatti, Stefano, 2013. "Does the private sector receive an excessive return from investments in health care infrastructure projects? Evidence from the UK," Health Policy, Elsevier, vol. 110(2), pages 243-270.

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