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An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom
Bibliography: pages 78-81.
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| Format: | Thesis |
| Language: | English |
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School of Economics
2016
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| _version_ | 1867613343314870272 |
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| access_status_str | Open Access |
| author | M'pasi, Abrahams Mutedi |
| author2 | High, Hugh |
| author_browse | High, Hugh M'pasi, Abrahams Mutedi |
| author_facet | High, Hugh M'pasi, Abrahams Mutedi |
| author_sort | M'pasi, Abrahams Mutedi |
| collection | Thesis |
| description | Bibliography: pages 78-81. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/17348 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:34:38.153Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2016 |
| publishDateRange | 2016 |
| publishDateSort | 2016 |
| publisher | School of Economics |
| publisherStr | School of Economics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/17348 An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom M'pasi, Abrahams Mutedi High, Hugh Economics Bibliography: pages 78-81. In the late 1930s, the Great Depression and its consequences led to the U.S federal government's intervention in credit assistance and insurance programmes. The main reason for this intervention was that there was a general desire to rescue individuals and businesses which were unable to repay their debts when due. Considerable debate has focused on the determination of the magnitude of the government liabilities resulting from guaranteed loan re-payments. Today, most nations, including South Africa, employ such government guarantees, but they are often improperly valued; that is, one has no idea whether such guarantees are 'good ' or 'bad' policy tools. This paper illustrates how Put option pricing models may be used to estimate the 'real' cost to the South African government of a loan guarantee to Eskom, which is investing a large hydroelectric project in Mozambique, hypothetically assuming that Eskom has been privatized. While the paper recognises the importance of the insurance premium which could be charged by the government for its loan guarantee, the results under the hypothetical case show that the Eskom is able to readily repay the promised payment and, thus, the loan guarantee provides value to Eskom's owners. In this regard, one can argue that parties involved in such a project, such as the South African government, Eskom and the European agencies may benefit from the loan guarantee programme. Thus, a loan guarantee programme may be seen as a 'good' policy tool to resolve conflicts between lenders and borrowers, to encourage investment and to meet a broader public interest. 2016-02-29T12:03:07Z 2016-02-29T12:03:07Z 1995 Master Thesis Masters MCom http://hdl.handle.net/11427/17348 eng application/pdf School of Economics Faculty of Commerce University of Cape Town |
| spellingShingle | Economics M'pasi, Abrahams Mutedi An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| thesis_degree_str | Master's |
| title | An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| title_full | An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| title_fullStr | An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| title_full_unstemmed | An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| title_short | An application of an option pricing model to evaluate the cost of a government loan guarantee : an hypothetical case based on Eskom |
| title_sort | application of an option pricing model to evaluate the cost of a government loan guarantee an hypothetical case based on eskom |
| topic | Economics |
| url | http://hdl.handle.net/11427/17348 |
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