IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Evaluating Minimum-Traffic Guarantees for PPPs in Turkey by Real-Option Pricing

Listed author(s):
  • Ilker Ersegun Kayhan

    ()

    (Chevening/Abdullah Gül Research Fellow, Oxford Center for Islamic Studies, University of Oxford)

  • Glenn P. Jenkins

    ()

    (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)

Minimum-traffic guarantees for build-operate-transfer toll-road projects are contingent liabilities that expose government to fiscal risk. Therefore, public authorities must value guarantees, thereby enabling informed decision-making about the level and type of guarantee provision. This study demonstrates the use of financial modeling and risk analysis in a toll-road project in Turkey, contributing to the narrowing of a capacity gap in the field. We present three types of guarantee, modeled as real options and evaluated by Monte Carlo simulation. We identify one criterion to determine the optimum level of guarantee for a given project, and one criterion to measure the extent to which a guarantee will reduce risk. Based on these and other complementary criteria, it is proposed that the guarantee with income ceiling is the most appropriate for the project considered here. The paper concludes with a discussion of the policy implications of the findings.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.queensjdiexec.org/publications/qed_dp_284.pdf
Download Restriction: no

Paper provided by JDI Executive Programs in its series Development Discussion Papers with number 2016-02.

as
in new window

Length: 24 pages
Date of creation: Feb 2016
Handle: RePEc:qed:dpaper:284
Contact details of provider: Postal:
Kingston, Ontario, K7L 3N6

Phone: (613) 533-2250
Fax: (613) 533-6668
Web page: http://www.econ.queensu.ca/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
  2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
  3. Currie, Elizabeth, 2002. "The potential role of government debt management office in monitoring and managing contingent liabilities," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34871, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  4. Charles Cheah & Jicai Liu, 2006. "Valuing governmental support in infrastructure projects as real options using Monte Carlo simulation," Construction Management and Economics, Taylor & Francis Journals, vol. 24(5), pages 545-554.
  5. Jun Jaebum, 2010. "Appraisal of Combined Agreements in BOT Project Finance: Focused on Minimum Revenue Guarantee and Revenue Cap Agreements," International Journal of Strategic Property Management, De Gruyter Open, vol. 14(2), pages 139-155, June.
  6. Carliss Baldwin & Donald Lessard & Scott Mason, 1983. "Budgetary Time Bombs: Controlling Government Loan Guarantees," Canadian Public Policy, University of Toronto Press, vol. 9(3), pages 338-346, September.
  7. Anand Rajaram & Tuan Minh Le & Kai Kaiser & Jay-Hyung Kim & Jonas Frank, 2014. "The Power of Public Investment Management : Transforming Resources into Assets for Growth," World Bank Publications, The World Bank, number 20393.
  8. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
  9. Timothy Irwin, 2003. "Public Money for Private Infrastructure : Deciding When to Offer Guarantees, Output-based Subsidies, and Other Fiscal Support," World Bank Publications, The World Bank, number 15117.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:qed:dpaper:284. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bahman Kashi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.