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The term structure of credit spreads in project finance Supplementary material for this article can be found at http:||www.interscience.wiley.com|jpages|1076-9307|suppmat|ijfe.350.html

Author

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  • Marco Sorge

    (The World Bank, USA)

  • Blaise Gadanecz

    (Bank for International Settlements, Switzerland)

Abstract

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. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Marco Sorge & Blaise Gadanecz, 2008. "The term structure of credit spreads in project finance Supplementary material for this article can be found at http:||www.interscience.wiley.com|jpages|1076-9307|suppmat|ijfe.350.html," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 68-81.
    • Handle: RePEc:ijf:ijfiec:v:13:y:2008:i:1:p:68-81
    DOI: 10.1002/ijfe.350
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    Cited by:

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    2. Danilov Yuri, 2016. "The experience of financial markets reforms in the countries – competitors of Russia in the global capital market," Research Paper Series, Gaidar Institute for Economic Policy, issue 171P, pages 156-156.
    3. Svetlana Dobrodomova, 2011. "Financial capital: the emergence and socio-economic importance," Published Papers novg09, Russian Presidential Academy of National Economy and Public Administration.
    4. Chipurenko, Elena (Чипуренко, Елена) & Lisovskaya, Irina (Лисовская, Ирина) & Trapeznikova, Natalia (Трапезникова, Наталья), 2017. "Reforming the Financial Accounting Regulation and Reporting System, the Order of Integration into the Economic and Educational Environment [Реформирование Системы Регулирования Финансового Учета И ," Working Papers 051720, Russian Presidential Academy of National Economy and Public Administration.
    5. Kurakova, N (Куракова, Н.) & Zinov, Vladimir (Зинов, Владимир) & Tsvetkova, L (Цветкова, Л.), 2015. "Development of "Road Maps" of Key Industrial Technologies for the Period Until 2030 [Разработка «Дорожных Карт» Развития Ключевых Производственных Технологий На Период До 2030 Года]," Published Papers mn1, Russian Presidential Academy of National Economy and Public Administration.

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