Measuring Value-at-Risk in Project Finance Transactions

24 Pages Posted: 8 Jan 2007

See all articles by Stefano Gatti

Stefano Gatti

Bocconi University - Department of Finance

Alvaro Rigamonti

Rizzani de Eccher S.p.A.

Francesco Saita

Bocconi University - Department of Finance

Mauro Senati

Banca Intesa - Credit Risk Management Department

Abstract

Despite the remarkable importance of project finance in international financial markets, no quantitative models to measure and quantify the risk associated with a deal for the project's lenders have been developed yet. The topic has recently become crucial, since the New Basle Capital Accord gives banks a choice of whether to adopt simpler (but possibly higher) standard capital requirements or to develop internal rating models for project finance transactions. The paper proposes how Monte Carlo simulations may be used to derive a Value-at-Risk estimate for project finance deals and discusses the critical issues that must be considered when developing such a model.

Suggested Citation

Gatti, Stefano and Rigamonti, Alvaro and Saita, Francesco and Senati, Mauro, Measuring Value-at-Risk in Project Finance Transactions. European Financial Management, Vol. 13, No. 1, pp. 135-158, January 2007, Available at SSRN: https://ssrn.com/abstract=955557 or http://dx.doi.org/10.1111/j.1468-036X.2006.00288.x

Stefano Gatti (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Alvaro Rigamonti

Rizzani de Eccher S.p.A. ( email )

Via Buttrio, Frazione Cargnacco
33050 Pozzuolo del Friuli (UD)
Italy
+39 0432 6071 (Phone)
+39 0432 522336 (Fax)

HOME PAGE: http://www.rizzanideeccher.com/eng/indexe.html

Francesco Saita

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Mauro Senati

Banca Intesa - Credit Risk Management Department ( email )

Via Verri, 4
Milan 20121, 20121
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
24
Abstract Views
4,637
PlumX Metrics