The Pay‐for‐Success Contract: A Valuation Note

Andreas Andrikopoulos and Andrianos Tsekrekos

Journal of Futures Markets, 2024, vol. 44, issue 9, 1465-1473

Abstract: Pay‐for‐success contracts are social and financial innovations in social policy and capital markets, respectively. This paper argues that they exhibit option‐like payoffs and implements standard option‐pricing arguments in assessing the value of investing in pay‐for‐success contracts. Sensitivities vis‐à‐vis contract specifications are reflected in the valuation formula and help reach investment and social policy decisions. These sensitivities are demonstrated via a numerical application that uses parameters drawn from the Massachusetts Juvenile Justice Pay for Success Initiative, the largest pay‐for‐success initiative in the United States at the time of its launch.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22534

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:44:y:2024:i:9:p:1465-1473

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().