Unlisted Infrastructure Debt Valuation & Performance Measurement

Frédéric Blanc-Brude, Majid Hasan, Omneia R.H. Ismail: The purpose of the present publication, “Unlisted Infrastructure Debt Valuation & Performance Measurement”, which is drawn from the NATIXIS research chair at EDHEC-Risk Institute on the “Investment and Governance Characteristics of Infrastructure Debt Instruments”, is to design the first academically robust, yet operationally implementable valuation and risk measurement framework for investing in illiquid infrastructure debt.

Author(s):

Frederic Blanc-Brude

Research Director at EDHEC Risk Institute–Asia and Head of Institute’s thematic research programme on infrastructure financing and investment.

Majid Hasan

Research Assistant at EDHEC Risk Institute-Asia and PhD Candidate at EDHEC Business School.

Omneia R.H. Ismail

Senior Research Engineer with EDHEC Risk Institute—Asia

Long-term infrastructure debt poses a significant pricing challenge since market prices cannot be observed, private cash flow data is scattered amongst originators and investors, and the covenants and lender control-rights found in such instruments create embedded options that are not taken into account in the loan and bond valuation models typically used by lenders and investors. Taking these characteristics into account is instrumental to capture the expected performance of infrastructure debt, in particular, its high level of post-default recovery. However, existing analyses have so far ignored the endogenous nature of credit risk in project finance and rely on ad hoc credit risk assumptions. This paper is one of the stepping stones of the "roadmap" established by EDHEC-Risk Institute towards the creation of adequate performance measurement tools for longterm investors in infrastructure.
Pdf
Unlisted Infrastructure Debt Valuation & Performance Measurement...
(923.96 KB)
Type: EDHEC Publication
Date: le 30/07/2014
Extra information : For more information, please contact EDHEC Research and Development Department [ [email protected] ]
Research Cluster : Finance

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