Risk transfer in project finance loans for toll road using credit default swaps

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wei Yang ◽  
Afshin Firouzi ◽  
Chun-Qing Li
Keyword(s):  
Power Law ◽  
Credit Default Swaps ◽  
Free Cash Flow ◽  
Project Finance ◽  
Cost Of Debt ◽  
Power Law Model ◽  
Data Set ◽  
Content Type ◽  
Toll Road ◽  
Credit Default

Purpose The purpose of this paper is to demonstrate the applicability of the Credit Default Swaps (CDS), as a financial instrument, for transferring of risk in project finance loans. Also, an equation has been derived for pricing of CDS spreads. Design/methodology/approach The debt service cover ratio (DSCR) is modeled as a Brownian Motion (BM) with a power-law model fitted to the mean and half-variance of the existing data set of DSCRs. The survival probability of DSCR is calculated during the operational phase of the project finance deal, using a closed-form analytical method, and the results are verified by Monte Carlo simulation (MCS). Findings It is found that using the power-law model yields higher CDS premiums. This in turn confirms the necessity of conducting rigorous statistical analysis in fitting the best performing model as uninformed reliance on constant time-invariant drift and diffusion model can erroneously result in smaller CDS spreads. A sensitivity analysis also shows that the results are very sensitive to the recovery rate and cost of debt values. Originality/value Insufficiency of free cash flow is a major risk in the toll road project finance and hence there is a need to develop innovative financial instruments for risk management. In this paper, a novel valuation method of CDS is proposed assuming that DSCR follows the BM stochastic process.

Corporate governance and dividend policy in Sri Lankan firms: a data triangulation approach

2020 ◽  
Vol 12 (4) ◽  
pp. 543-560
Author(s):  
H. Kent Baker ◽  
Narayanage Jayantha Dewasiri ◽  
Sandaram P. Premaratne ◽  
Weerakoon Yatiwelle Koralalage
Keyword(s):  
Corporate Governance ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Sri Lankan ◽  
Survey Analysis ◽  
Data Set ◽  
Market Data ◽  
Content Type

Purpose This paper aims to investigate the relation between corporate governance and dividend policy in Sri Lankan firms. Design/methodology/approach The data set consists of market data using 1,608 firm-year observations from 201 firms listed on the Colombo Stock Exchange and survey-based data from 151 respondents from the same 201 firms. The authors use data triangulation to examine the two approaches. Findings The analysis of the market data reveals that a significantly positive relation between corporate governance on both the propensity to pay dividends and dividend payout. Survey analysis confirms these findings. Triangulated evidence supports the outcome model of dividends, free cash flow and agency cost theories. Practical implications The findings are useful not only for management in developing suitable corporate governance practices and dividend policies for their firms but also for shareholders in evaluating both existing and new investments. Future researchers should investigate the same phenomenon in other contexts using triangulation approaches to confirm their findings. Originality/value This study is the first to use governance indices both in terms of survey and market-based data to examine the relation between corporate governance and dividend policy.

Success criteria of toll road projects from a community societal perspective

2017 ◽  
Vol 7 (1) ◽  
pp. 32-44 ◽  
Author(s):  
Mohammad Arif Rohman ◽  
Hemanta Doloi ◽  
Christopher Andrew Heywood
Keyword(s):  
Societal Perspective ◽  
Social Benefit ◽  
Social Dimension ◽  
Data Set ◽  
Content Type ◽  
Factors Associated ◽  
Toll Road ◽  
Success Criteria ◽  
Road Projects ◽  
Project Lifecycle

Purpose While the success of the toll road projects procured through public private partnerships (PPPs) routes are widely confined to the cost, time and quality performance in the delivery context, considerable evidence suggests that such success criteria are not sufficient when the toll road projects are assessed in relation to meeting the long-run community expectations. The purpose of this paper is to examine the key factors associated with the success of the toll road projects from a societal perspective in Indonesia. Design/methodology/approach Based on the input from 12 experts and a rigorous literature review, a questionnaire survey was designed and a total of 206 respondents from three broad stakeholders’ groups, namely, government, private and end-users’ communities were surveyed to measure the performance of eight toll road projects. The data were primarily analyzed using exploratory factor analysis and reliability test using SPSS Software. Findings Four significant factors associated with the project social benefit were established as a measure of the overall success criteria in toll road projects. It is expected these can be used as guidance to deliver project social benefit to the community in the overall project lifecycle. Research limitations/implications This research contributes to the incorporation of social project benefit attributes to the the toll road projects’ success criteria in overall project lifecycle. Practical implications This study can be used as guidance for the overall stakeholders, such as the government and the project manager to address the current social problems and better navigate the project direction in order to achieve the overall toll road project success in the overall project lifecycles. Social implications The research highlights how the Indonesian government’s program of developing toll road projects using the PPP procurement routes can be supported for complete social inclusivity by considering the social dimension to achieve long-term success. Originality/value Identification of the key project social factors based on the data set with a wide representation of the stakeholders has made the research original and unique.

MHD flow of a non-Newtonian nanofluid over a non-linearly stretching sheet in the presence of thermal radiation with heat source/sink

2016 ◽  
Vol 33 (5) ◽  
pp. 1610-1626 ◽  
Author(s):  
Madhu Macha ◽  
Kishan Naikoti ◽  
Ali J Chamkha
Keyword(s):  
Boundary Layer ◽  
Brownian Motion ◽  
Thermal Radiation ◽  
Power Law ◽  
Stretching Sheet ◽  
Mhd Flow ◽  
Power Law Model ◽  
Content Type ◽  
Electrically Conducting ◽  
Source Sink

Purpose – The purpose of this paper is to analyze the mangnetohydrodynamic boundary layer flow of a viscous, incompressible and electrically conducting non-Newtonian nanofluid obeying power-law model over a non-linear stretching sheet under the influence of thermal radiation with heat source/sink. Design/methodology/approach – The transverse magnetic field is applied normal to the sheet. The model used for the nanofluid incorporates the effects of Brownian motion with thermophoresis in the presence of thermal radiation. On this regard, thermophoresis effect on convective heat transfer on nanofluids are investigated simultaneously. The governing partial differential equations are reduced to ordinary differential equations by suitable similarity transformations which are solved numerically by variational finite element method. Findings – The computations carried out for some values of the power-law index, magnetic parameter, radiation parameter, Brownian motion and thermophoresis. The effect of these parameters on the velocity, temperature and nanoparticle volume fraction distribution are presented graphically. The skin friction coefficient, Nusselt number and Sherwood number for various values of the flow parameters of the problem are also presented. Originality/value – To the best of the authors’ knowledge, no investigations has been reported regarding the study of non-Newtonian nanofluids which obeying power-law model over a nonlinear stretching sheet. The principal aim of this paper is to study the boundary layer MHD flow of a non-Newtonian power-law model over a non-linear stretching sheet on a quotient viscous incompressible electrically conducting with a nanofluid.

scholarly journals Credit Market Speculation and the Cost of Capital

2014 ◽  
Vol 6 (4) ◽  
pp. 1-34 ◽  
Author(s):  
Yeon-Koo Che ◽  
Rajiv Sethi
Keyword(s):  
Multiple Equilibria ◽  
Cost Of Capital ◽  
Credit Derivatives ◽  
Credit Market ◽  
Credit Default Swaps ◽  
Cost Of Debt ◽  
Insurable Interest ◽  
Rollover Risk ◽  
Credit Default ◽  
The Cost

We examine the effects of speculation using credit derivatives on the cost of debt and the likelihood of default. The availability of credit default swaps induces investors who are optimistic about borrower revenues to sell protection instead of buying bonds. This benefits borrowers if protection can only be bought with an insurable interest, but can increase the cost of debt and crowd out productive lending if protection can be purchased as a bet on default. We also show that the possibility of speculation on default may cause multiple equilibria and exacerbate the problem of rollover risk. (JEL D86, G13, G31)

scholarly journals Compressing Over-the-Counter Markets

2021 ◽  
Author(s):  
Marco D’Errico ◽  
Tarik Roukny
Keyword(s):  
Historical Development ◽  
Global Financial Crisis ◽  
Credit Default Swaps ◽  
Large Share ◽  
Data Set ◽  
Over The Counter ◽  
Level Data ◽  
Credit Default ◽  
The Global Financial Crisis ◽  
Size And Structure

Over-the-counter markets are at the center of the global reform of the financial system. We show how the size and structure of these markets can undergo rapid and extensive changes when participants engage in portfolio compression, which is an optimization technology that exploits multilateral netting opportunities. We find that tightly knit and concentrated trading structures, as featured by many large over-the-counter markets, are especially susceptible to reductions of notional amounts and network reconfigurations resulting from compression activities. Using a unique transaction-level data set on credit-default-swaps markets, we estimate reduction levels, suggesting that the adoption of this technology can account for a large share of the historical development observed in these markets since the global financial crisis. Finally, we test the effect of a mandate to centrally clear over the counter markets in terms of size and structure. When participants engage in both central clearing and portfolio compression with the clearinghouse, we find large netting failures if clearinghouses proliferate. Allowing for compression across clearinghouses by and large offsets this adverse effect.

scholarly journals Joint estimation of the Epoch of Reionization power spectrum and foregrounds

2019 ◽  
Vol 488 (2) ◽  
pp. 2904-2916 ◽  
Author(s):  
Peter H Sims ◽  
Jonathan C Pober
Keyword(s):  
Power Spectrum ◽  
Power Law ◽  
Spatial Scales ◽  
Model Complexity ◽  
Scale Model ◽  
Spectral Structure ◽  
Synchrotron Emission ◽  
Power Law Model ◽  
Data Set ◽  
Spectral Scale

ABSTRACT The power spectrum of redshifted 21 cm emission brightness temperature fluctuations is a powerful probe of the Epoch of Reionization (EoR). However, bright foreground emission presents a significant impediment to its unbiased recovery from interferometric data. We estimate the power spectrum within a Bayesian framework and demonstrate that incorporating a priori knowledge of the spectral structure of foregrounds in the large spectral scale component of the data model enables significantly improved modelling of the foregrounds without increasing the model complexity. We explore two astrophysically motivated parametrizations of the large spectral scale model: (i) a constant plus power-law model of the form $q_{0}+q_{1}(\nu /\nu _{0})^{b_{1}}$ for two values of b1: b1 = 〈β〉GDSE and b1 = 〈β〉EGS, the mean spectral indices of the Galactic diffuse synchrotron emission and extragalactic source foreground emission, respectively; and (ii) a constant plus double power-law model of the form $q_{0}+q_{1}(\nu /\nu _{0})^{b_{1}}+q_{2}(\nu /\nu _{0})^{b_{2}}$ with b1 = 〈β〉GDSE and b2 = 〈β〉EGS. We estimate the EoR power spectrum from simulated interferometric data consisting of an EoR signal, Galactic diffuse synchrotron emission, extragalactic sources, and diffuse free–free emission from the Galaxy. We show that, by jointly estimating a model of the EoR signal with the constant plus double power-law parametrization of the large spectral scale model, unbiased estimates of the EoR power spectrum are recoverable on all spatial scales accessible in the data set, including on the large spatial scales that were found to be contaminated in earlier work.

Intermetallic growth kinetics in gold ball bonds on Al-1%Si-0.5%Cu bond pads at 175∘C

2019 ◽  
Vol 37 (1) ◽  
pp. 36-45
Author(s):  
Christopher Breach
Keyword(s):  
Power Law ◽  
Growth Kinetics ◽  
Reactive Diffusion ◽  
Power Law Model ◽  
Content Type ◽  
Intermetallic Growth ◽  
Parabolic Kinetics ◽  
Gold Ball ◽  
Intermetallic Growth Kinetics ◽  
Ball Bonds

Purpose The purpose of this study is to demonstrate that isothermal intermetallic growth data for gold ball bonds can be non-parabolic with explanations of why deviation from parabolic kinetics may occur. Design/methodology/approach Intermetallic thickness measurements were made at the centre of cross-sectioned ball bonds that were isothermally annealed at 175°C. Intermetallic growth kinetics were modelled with a power law expression(x(t) − x0)2 = α1tα2. The parameters of the power law model were obtained by transformation of the response and explanatory variables followed by data fitting using simple linear regression (SLR). Findings Ball bonds made with 4 N (99.99%Au) and 3 N (99.9%Au) gold wires exhibited two consecutive time regimes of intermetallic growth denoted Regime I and Regime II. Regime I was characterised by reactive diffusion between the gold wire and the aluminium alloy bond pad, during which Al was completely consumed in the formation of Au–Al intermetallics with non-parabolic kinetics. In Regime II, the absence of a free supply of Al to sustain intermetallic growth led to the conclusion that thickening of intermetallics was caused by phase transformation of Au8Al3 to Au4Al. Ball bonds made with 2 N (99%Au) wire also exhibited non-parabolic kinetics in Regime I and negligible intermetallic thickening in Regime II. Research limitations/implications The analysis of intermetallic growth is limited to total intermetallic growth at a single temperature (175°C). Originality/value The value of this study lies in showing that the assumption that only parabolic intermetallic growth is observed in isothermally aged gold ball bonds is incorrect. Furthermore there is no need to assume parabolic growth kinetics because with an appropriate data transformation, followed by fitting the data to a power law model using SLR and with the use of statistical diagnostics, both the suitability of the kinetic model and the nature of the growth kinetics (parabolic or non-parabolic) can be determined.

scholarly journals Determinants of bank loan spread in project finance

2019 ◽  
Vol 12 (1) ◽  
pp. 161-186 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Bank Lending ◽  
Policy Implications ◽  
Bank Loan ◽  
Economic Environment ◽  
Project Finance ◽  
Cost Of Debt ◽  
Infrastructure Projects ◽  
Content Type ◽  
Pricing Decisions ◽  
The Cost

Purpose The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project. Design/methodology/approach First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016. Findings The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself. Practical implications The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way. Originality/value One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.

Corporate social performance and cost of debt: the relationship

2017 ◽  
Vol 13 (2) ◽  
pp. 250-265 ◽  
Author(s):  
Barbara Sveva Magnanelli ◽  
Maria Federica Izzo
Keyword(s):  
Global Financial Crisis ◽  
Corporate Social Performance ◽  
Social Performance ◽  
Risk Profile ◽  
Cost Of Debt ◽  
Data Set ◽  
Content Type ◽  
Corporate Social ◽  
The Cost ◽  
Practical Implications

Purpose This paper aims to investigate the link between corporate social performance (CSP) and cost of debt financing. Despite academic debate has focused on the link between corporate social responsibility (CSR) and CSP (expressed through accounting and market measures of profitability), few empirical researches have analysed the relations between CSR, cost of debt and its relation with the risk profile of a firm. The literature on the cost of debt determinants generally documents a negative association between measures of the risk of the firm and its cost of debt. The literature on CSR defines risk reduction as one of the potential benefits related to CSR activities. Thus, the expectation is that high CSP scores are inversely related to cost of debt. Design/methodology/approach Using a unique data set of 332 firms over a time period of five years antecedent to the global financial crisis, a linear regression model is applied. Findings The results show a positive relation between CSP and cost of debt, demonstrating that CSR is not a value driver with an impact on the firm’s risk profile. Practical implications The research has also practical implications as it makes managers aware of the potentiality of CSP to reduce the firm’s cost of debt. Originality/value These findings enlarge the empirical research on the value of CSP, expanding it towards a quite new area of investigation: the cost of external financing.

Loan tenor in project finance

2019 ◽  
Vol 12 (3) ◽  
pp. 825-842 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Political Risk ◽  
Bank Lending ◽  
Bank Loans ◽  
Policy Implications ◽  
Project Finance ◽  
Basel Iii ◽  
Infrastructure Projects ◽  
Data Set ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to develop a better understanding of the debt structuring of project finance (PF) loans and the main drivers affecting the maturity of bank loans in infrastructure deals. When banks grant loans to a project, they have two decision variables: the interest margin or the spread and the maturity of the loan. Although several studies analyze the drivers of the spread, few studies in the literature look at the maturity of bank loans. As infrastructure projects are typically highly leveraged, the structuring of bank lending is an important parameter in the financial viability of the project. Design/methodology/approach The paper develops a regression analysis of the loan’s maturity on four categories: characteristics of the project, political risk of the country where the project is executed, the macro-economic setting and the regulatory framework. By using a new data set of InfraDeals containing data on bank loans of more than 1,800 infrastructure projects worldwide from 1997 to 2016, this paper reveals new insights on the debt structuring of banks for PF loans. Findings The results indicate that the maturity of bank loans granted to infrastructure deals is predominantly driven by political risk and regulation, rather than the structuring of the project. This implicates that the region where the deal is closed weighs more heavily than the specificities of the project itself. Originality/value The results have important policy implications. The paper allows to develop a better understanding on how political risk and new regulation, like Basel III, might affect the PF market. The paper is the first one finding empirical evidence of the impact of Basel III regulation on PF lending. By delving deeper into the political risk variable, the authors formulate several recommendations to mitigate political risk.

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