Abstract
Based on multi-objective programming method, this paper reviews the previous research on the problem of government guarantees in the project financing, and puts forward the importance of the research on project selection of government guarantee in Build-Operate-Transfer (BOT) or Public Private Partnership (PPP) project finance. Through the analysis of the selection criteria of guarantee project, we find that the selection problem of government guarantee of BOT/PPP infrastructure projects is essentially a multi-objective decision problem. Moreover, we establish a chance-constrained objective programming model for the government to make the decision to guarantee project selection.
Highlights
Infrastructure, as the foundation of urban survival, is the guarantee of the national economy and the sustainable development of society
Through the analysis of the selection criteria of guarantee project, we find that the selection problem of government guarantee of BOT/Private Partnership (PPP) infrastructure projects is essentially a multi-objective decision problem
The economic feasibility of the project is measured by the economic net present value (ENPV); the financial feasibility of the project is measured by the financial net present value (FNPV)
Summary
Infrastructure, as the foundation of urban survival, is the guarantee of the national economy and the sustainable development of society. Guo, & Zhao (2009) and Wang, Guo, & Sun (2009) have constructed the measurement model for government guarantee value of infrastructure project by discussing the option characteristics of floating return on investment government guarantee. They establish the government guarantee pricing model based on jump-diffusion process by introducing Poisson distribution to depict the influence of unexpected events on government guarantee value, which is a further generalization on the original government guarantee pricing research. This paper intends to use the multi-objective programming method to help the government choose guarantee projects in infrastructure project financing, which is a multi-objective decision-making problem.
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