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Project Finance Exposures in the Supervisory Slotting Criteria Approach: Pricing and Judgemental Analysis

In: Asset Pricing, Real Estate and Public Finance over the Crisis

Author

Listed:
  • Pietro Marchetti
  • Anna Valeria Venneri

Abstract

This study fits into the research topic about the pricing and risk management models in the decisions of financial intermediaries. In particular, this work investigates the Project Finance (PF) exposures which are characterized by a specific prudential regulation in the general framework of Basel II, so called Supervisory Slotting Criteria Approach (SSCA). In the Internal Ratings-Based (IRB) approach, banks that don’t meet the requirements for the estimation of probability of default (PD) under the corporate Foundation approach for their specialized lending (SL) assets (that include the sub-class of PF) are required to map their internal risk grades to five supervisory categories (strong, good, satisfactory, weak, default), each of which is associated with a specific risk weight depending on both the project’s strength and the loan’s maturity (M).

Suggested Citation

  • Pietro Marchetti & Anna Valeria Venneri, 2013. "Project Finance Exposures in the Supervisory Slotting Criteria Approach: Pricing and Judgemental Analysis," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Alessandro Carretta & Gianluca Mattarocci (ed.), Asset Pricing, Real Estate and Public Finance over the Crisis, chapter 13, pages 228-241, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-29377-0_14
    DOI: 10.1057/9781137293770_14
    as

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