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Valuing Callable And Putable Revenue-Performance-Linked Project Backed Securities

Author

Listed:
  • FENG DONG

    (Department of Civil Engineering, Columbia University, New York, NY, 10027, USA)

  • NICOLA CHIARA

    (Department of Civil Engineering, Columbia University, New York, NY, 10027, USA)

  • JAN VECER

    (Department of Statistics, Columbia University, New York, NY, 10027, USA)

Abstract

Public owners face a constant demand for developing new projects and for funding the renewal, maintenance and operation of existing infrastructure projects. One way to raise capitals to provide new financial resources to constrained budgets is to securitize a stream of revenue cash flows from a portfolio of mature infrastructure projects. We present a new type of PBS, the revenue performance-linked project backed securities (PBS), with embedded call and put options. In this new PBS setting, risks for issuers and buyers can be confined within a cut-off area. This risk hedging feature is expected to facilitate the trading of such products.

Suggested Citation

  • Feng Dong & Nicola Chiara & Jan Vecer, 2010. "Valuing Callable And Putable Revenue-Performance-Linked Project Backed Securities," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 13(05), pages 751-765.
    • Handle: RePEc:wsi:ijtafx:v:13:y:2010:i:05:n:s021902491000598x
    DOI: 10.1142/S021902491000598X
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    References listed on IDEAS

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    1. Hatem Ben-Ameur & Michèle Breton, 2004. "A Dynamic Programming Approach for Pricing Options Embedded in Bonds," Computing in Economics and Finance 2004 237, Society for Computational Economics.
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    Cited by:

    1. Surbhi Gupta & Anil Kumar Sharma, 2022. "Evolution of infrastructure as an asset class: a systematic literature review and thematic analysis," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 173-200, May.

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