Risk-Sharing Contracts in Project Appraisal

Authors

  • Graham Glenday Harvard Institute for International Development Harvard University Cambridge, Massachusetts

DOI:

https://doi.org/10.3138/cjpe.0012.006

Abstract

This article discusses how to adapt Monte Carlo simulation techniques for the analysis of risk-sharing contracts. It outlines parallels with contingent claims analysis of risk-sharing contracts, and discusses the roles and effects of the different basic types of risk contracts in managing risk and improving the feasibility of projects, particularly large-scale resource and utility contracts. The author presents the simple analytics of how risk-sharing contracts affect the expected returns and variance in these returns of the various participants in a project, along with how to incorporate risk sharing in Monte Carlo simulation technique models of the appraisal of projects. These techniques make the analysis of different structures of often complicated contracts for large complex projects tractable.

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Published

1997-12-01

How to Cite

Glenday, G. (1997). Risk-Sharing Contracts in Project Appraisal. Canadian Journal of Program Evaluation, 12(3), 99–120. https://doi.org/10.3138/cjpe.0012.006

Issue

Vol. 12 No. 3 (1997): Special Issue

Section

Articles

License

Copyright (c) 1997 Graham Glenday

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