Chapter
Jun 13, 2017

Risk-Aware Multi-Objective Optimization of Capital Structure for Private Financing in Infrastructure Projects

Publication: Computing in Civil Engineering 2017

Abstract

This study proposes a simulation-based and risk-aware multi-objective optimization framework to determine the capital structure for private financing in infrastructure projects to align the interests between the lender and the shareholder. Monte Carlo simulation is used for project valuation and conditional value at risk is introduced to measure the inherent risk associated with the expected project performance. A multi-objective optimization problem is formulated, where the decision variables are the amounts of diversified debt instruments, the first objective is to maximize the net present value while minimize the conditional cash flow at risk from the shareholder’s perspective, and the second objective is to maximizes the rate of return on the loans while minimize the default risk of shareholders from the lender’s perspective. Fast non-dominated sorting genetic algorithm NSGA-II is used to solve the problem. The case of Indiana Toll Road is presented as a numerical study to prove the concept.

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Go to Computing in Civil Engineering 2017
Computing in Civil Engineering 2017
Pages: 18 - 25

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Published online: Jun 13, 2017

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Ph.D. Candidate, Lyles School of Civil Engineering, Purdue Univ., 550 Stadium Mall Dr., West Lafayette, IN 47907. E-mail: [email protected]
Associate Professor, Lyles School of Civil Engineering, Purdue Univ., 550 Stadium Mall Dr., West Lafayette, IN 47907. E-mail: [email protected]

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