Using Monte Carlo Simulation in a System for Project Risk Appraisal: Options for Government and Private Practitioners

Renato Reside

No 200013, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This study is an offshoot of a project on the estimation of contigent liabilities of the Philippine government. The Monte Carlo simulation method adopted for estimating exposure (or expected losses) to NG-assumed risks in many Build-Operate-Transfer infrastructure projects makes it possible for policymakers to classify and rank projects according to risk, and set risk-adjusted guarantee fees, helping to mitigate many adverse selection and moral hazard problems in the project appraisal, approval, and monitoring process. Six projects (not explicitly identified) are analyzed for risk, and risk indicators are constructed for each to facilitate comparison and classification. Projects for which government bears excessive risk may be restructured before approval, while contigency financing may be arranged for projects that have already commenced operations. In addition, expected lesses serve as an input into the calculation of actuarially-fair guarantee premia.

Pages: 46 pages
Date: 2000-12
References: Add references at CitEc
Citations:

Published as UPSE Discussion Paper No. 2000-11, December 2000

Downloads: (external link)
http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/62/54 (application/pdf)

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:phs:dpaper:200013

Access Statistics for this paper

More papers in UP School of Economics Discussion Papers from University of the Philippines School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by RT Campos ().