An alternative valuation of public-private partnerships by using the Black-Scholes model: the Portuguese highway case
by Victor Barros; David Pedra Costa; Joaquim Miranda Sarmento
Global Business and Economics Review (GBER), Vol. 26, No. 2, 2022

Abstract: This study evaluates Portuguese highway PPPs' initial valuation using real options methods to assess the potential mispricing of these projects that is model dependent. Our findings suggest that some of these PPPs could be completed without resorting to outside financing for the initial investment by selling a right to ownership of projects. This different approach to real investments using options could also enable hedging future operational risks without changing the project operationally. Overall, our study addresses a relevant policy implication - whether governments should protect their interest by adopting PPP valuation as real options.

Online publication date: Mon, 21-Feb-2022

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