Government motivation-embedded return guarantee for urban infrastructure projects based on real options

Qingpeng Man, Chengshuang Sun*, Yuesheng Fei, Martin Skitmore, Yong Bai, Weizhuo Lu

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)
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Abstract

Governments usually guarantee the amount of investment income to private sector partners to encourage their participation in Public-Private Partnership urban infrastructure development projects, with the ‘float return on investment guarantee’ being the main method in use by the Chinese government today. The current problems with the float return on investment guarantee are analysed and a guarantee approach with embedded motivatio nal behaviour is presented as an alternative. A pricing method option is then introduced as the motivation-embedded return guarantee has similar characteristics to real options. From this, a valuation model is developed that provides the basis of a new systematic method for calculating the government guarantee value.

Original languageEnglish
Pages (from-to)954-966
Number of pages13
JournalJournal of Civil Engineering and Management
Volume22
Issue number7
DOIs
Publication statusPublished - 2 Oct 2016
Externally publishedYes

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