The Term Structure of Credit Spreads in Project Finance

This paper finds that the term structure of credit spreads in project finance is hump-shaped. This contrasts with other types of debt, where credit risk is shown instead to increase monotonically with maturity ceteris paribus. We emphasize a number of peculiar features of project finance structures...

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Main Authors:	Sorge, Marco, Gadanecz, Blaise
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Interest Rates: Determination, Term Structure, and Effects E430 International Financial Markets G150 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170
Online Access:	http://hdl.handle.net/10986/4956

id	okr-10986-4956
recordtype	oai_dc
spelling	okr-10986-49562021-04-23T14:02:20Z The Term Structure of Credit Spreads in Project Finance Sorge, Marco Gadanecz, Blaise Interest Rates: Determination, Term Structure, and Effects E430 International Financial Markets G150 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170 This paper finds that the term structure of credit spreads in project finance is hump-shaped. This contrasts with other types of debt, where credit risk is shown instead to increase monotonically with maturity ceteris paribus. We emphasize a number of peculiar features of project finance structures that might underlie this finding, such as high leverage decreasing over time, long-term political risk guarantees and the sequential resolution of uncertainty along project advancement stages. Our result is particularly relevant given the importance of project finance as a source of long-term capital for infrastructure especially in developing countries and has implications for risk management in the framework of Basel II. 2012-03-30T07:30:34Z 2012-03-30T07:30:34Z 2008 Journal Article International Journal of Finance and Economics 10769307 http://hdl.handle.net/10986/4956 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Interest Rates: Determination, Term Structure, and Effects E430 International Financial Markets G150 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170
spellingShingle	Interest Rates: Determination, Term Structure, and Effects E430 International Financial Markets G150 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170 Sorge, Marco Gadanecz, Blaise The Term Structure of Credit Spreads in Project Finance
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This paper finds that the term structure of credit spreads in project finance is hump-shaped. This contrasts with other types of debt, where credit risk is shown instead to increase monotonically with maturity ceteris paribus. We emphasize a number of peculiar features of project finance structures that might underlie this finding, such as high leverage decreasing over time, long-term political risk guarantees and the sequential resolution of uncertainty along project advancement stages. Our result is particularly relevant given the importance of project finance as a source of long-term capital for infrastructure especially in developing countries and has implications for risk management in the framework of Basel II.
format	Journal Article
author	Sorge, Marco Gadanecz, Blaise
author_facet	Sorge, Marco Gadanecz, Blaise
author_sort	Sorge, Marco
title	The Term Structure of Credit Spreads in Project Finance
title_short	The Term Structure of Credit Spreads in Project Finance
title_full	The Term Structure of Credit Spreads in Project Finance
title_fullStr	The Term Structure of Credit Spreads in Project Finance
title_full_unstemmed	The Term Structure of Credit Spreads in Project Finance
title_sort	term structure of credit spreads in project finance
publishDate	2012
url	http://hdl.handle.net/10986/4956
_version_	1764393384285306880

The Term Structure of Credit Spreads in Project Finance

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