IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

An overview of project finance binomial loan valuation

  • Winsen, Joseph K.
Registered author(s):

    Setting project financing parameters, such as the loan to valuation ratio, loan interest rate, repayment schedules, and fees, requires detailed modelling of the resulting credit risk in a non-recourse setting. Structured credit risk models, based on the early work of Merton, have been developed in continuous time which can assist with project financing structuring. These models require a level of mathematical sophistication that may not always be available to those undertaking project financing analysis. This note provides an overview of a discrete time binomial approach to structural credit risk modelling, which enables project financing analysts a more accessible tool to evaluate project loan structures.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/B6W61-4XHVH6V-1/2/eb3109d3e34e0338ff44a165f179bee1
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Review of Financial Economics.

    Volume (Year): 19 (2010)
    Issue (Month): 2 (April)
    Pages: 84-89

    as
    in new window

    Handle: RePEc:eee:revfin:v:19:y:2010:i:2:p:84-89
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620170

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    2. Esa Jokivuolle & Samu Peura, 2003. "Incorporating Collateral Value Uncertainty in Loss Given Default Estimates and Loan-to-value Ratios," European Financial Management, European Financial Management Association, vol. 9(3), pages 299-314.
    3. Black, Fischer & Cox, John C, 1976. "Valuing Corporate Securities: Some Effects of Bond Indenture Provisions," Journal of Finance, American Finance Association, vol. 31(2), pages 351-67, May.
    4. Episcopos, Athanasios, 2008. "Bank capital regulation in a barrier option framework," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1677-1686, August.
    5. Mark Broadie & Mikhail Chernov & Suresh Sundaresan, 2007. "Optimal Debt and Equity Values in the Presence of Chapter 7 and Chapter 11," Journal of Finance, American Finance Association, vol. 62(3), pages 1341-1377, 06.
    6. Amadou N. R. Sy & Jorge A. Chan-Lau, 2006. "Distance-To-Default in Banking; A Bridge too Far?," IMF Working Papers 06/215, International Monetary Fund.
    7. Dan Galai & Alon Raviv & Zvi Wiener, 2003. "Liquidation Triggers and the Valuation of Equity and Debt," Finance 0305002, EconWPA.
    8. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 541-552, November.
    9. Marliese Uhrig-Homburg, 2002. "Valuation Of Defaultable Claims – A Survey," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 54(1), pages 24-57, January.
    10. Hilscher, Jens, 2007. "Is the corporate bond market forward looking?," Working Paper Series 0800, European Central Bank.
    11. Hayne E. Leland and Klaus Bjerre Toft., 1995. "Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads," Research Program in Finance Working Papers RPF-259, University of California at Berkeley.
    12. L. C. G. Rogers & S. E. Satchell, 2000. "Does the behaviour of the asset tell us anything about the option price formula? A cautionary tale," Applied Financial Economics, Taylor & Francis Journals, vol. 10(1), pages 37-39.
    13. Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    14. Anderson, Ronald W & Sundaresan, Suresh, 1996. "Design and Valuation of Debt Contracts," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 37-68.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:revfin:v:19:y:2010:i:2:p:84-89. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.