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Real Options in Public-Private Partnerships

Dejan Podhraški

In terms of legal language, a real option is a right, not an obligation, to take action on an underlying real asset. In terms of economic language a real options has its value, just like a financial option. Incentives that the public partner grants to the private partner in order to make the project more attractive, like the minimum revenue guarantee, the put option, the abandonment option, the extension option, input subsidies and others are in their essence real opt


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