Contents -- Preface -- Acknowledgments -- Chapter 1 Overview -- Allocation -- Valuation -- Rules -- Chapter 2 Lessons of History -- Early Guarantees -- The Popularity of Guarantees -- If You Insist on Something, Prepare to Bear the Risks -- Try Not to Guarantee Risks Investors Can Manage -- Be Careful That What You Guarantee Is What You Want -- Manage the Risks You Guarantee -- Progress? -- Chapter 3 Obstacles to Good Decisions -- Cognitive Obstacles -- Political Obstacles -- Overcoming the Obstacles -- Chapter 4 Allocating Exposure to Risk -- Definitions -- A Principle -- Governments' Special Features -- Chapter 5 The Allocation of Three Risks -- Exchange-Rate Risk -- Insolvency Risk -- Policy Risk -- Chapter 6 Rules -- Involving People with an Interest in Future Costs -- Charging Fees -- Setting Criteria and Requiring Analysis -- Using Markets to Value Guarantees -- Reporting According to Modern Accounting Standards -- Disclosing Additional Information -- Budgeting for Guarantees -- Chapter 7 Valuing Exposure to Risk -- Identifying Exposure -- Measuring Exposure -- Valuing Exposure -- Chapter 8 The Valuation of Exposure to Three Risks -- Exchange-Rate Risk -- Insolvency Risk -- Policy Risk -- Appendix A -- References -- Index -- Figures -- 3.1 A Typical Prospect-Theory Value Function -- 3.2 A Typical Prospect-Theory Decision-Weight Function -- 3.3 Intuitive Forecasts -- 4.1 Characterizing Total-Project-Value Risk -- 4.2 Stakeholders' Risks and Total-Project-Value Risk -- 4.3 Total-Project-Value Risk and Its Components-Demand and Earthquake Risk -- 4.4 Risks and Stakeholders -- 5.1 Currencies of Five Developing Countries against the U.S. Dollar, 1985 to 2002 -- 5.2 Annual Average Inflation and Currency Depreciation against the U.S. Dollar in a Sample of 89 Countries, 1976-2001.

5.3 Creditors' and Shareholders' Interest in the Firm as a Function of the Value of the Firm at the Maturity of Its Debt -- 5.4 Creditors' and Shareholders' Shares of the Value of the Firm and the Volatility of the Firm's Value, Holding Debt, and the Value of the Firm Constant -- 5.5 An Infrastructure Investment Game -- 5.6 Expropriation Risk and the Price Required for Investment -- 5.7 Legitimacy, Legal Protection, and Promised Prices -- 6.1 Decision Makers, Incentives, and Information -- 7.1 Termination-Payment Risk -- 7.2 Revenue Guarantee: Relative Frequency of Payments in Various Ranges -- 7.3 Construction-Cost Risk and Government Payments -- 7.4 A Forecast and Three Possible Paths for Revenue -- 8.1 Histogram of Guarantee Payments -- 8.2 The Value of the Firm and Guarantee Payments -- 8.3 Value of the Debt Guarantee as a Function of Changes in Leverage and Volatility -- 8.4 Two Possible Paths of Operating Cash Flows and Government Payments under a Guarantee of a Power-Purchase Agreement -- 8.5 Contractual and Actual Prices and Consequent Government Compensation: One Trial -- 8.6 Relative Frequency of Possible Values of Pricing Undertaking -- Tables -- 3.1 The Fourfold Pattern of Risk Aversion and Risk Seeking: Certainty Equivalents for Four Risks -- 4.1 Four Kinds of Risk and Examples Thereof -- 4.2 The Principle for Four Kinds of Risk -- 6.1 Chile's Disclosure of Guarantee Costs -- 7.1 Measures of Risk for the Revenue Guarantee for Year 1 -- 8.1 Summary Measures of Risk.