Structured climate financing: valuation of CDO on inhomogeneous asset pools

Artikel

Recently, a number of structured funds have emerged as public-private partnerships with the intent of promoting investment in renewable energy in emerging markets. These funds seek to attract institutional investors by tranching the asset pool and issuing senior notes with a high credit quality. Financing of renewable energy (RE) projects is achieved via two channels: small RE projects are financed indirectly through local banks that draw loans from the fund's assets, whereas large RE projects are directly financed from the fund. In a bottom-up Gaussian copula framework, we examine the diversification properties and RE exposure of the senior tranche. To this end, we introduce the LH++ model, which combines a homogeneous infinitely granular loan portfolio with a finite number of large loans. Using expected tranche percentage notional (which takes a similar role as the default probability of a loan), tranche prices and tranche sensitivities in RE loans, we analyse the risk profile of the senior tranche. We show how the mix of indirect and direct RE investments in the asset pool affects the sensitivity of the senior tranche to RE investments and how to balance a desired sensitivity with a target credit quality and target tranche size.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: SN Business & Economics ; ISSN: 2662-9399 ; Volume: 1 ; Year: 2021 ; Issue: 4 ; Cham: Springer International Publishing

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Contingent Pricing; Futures Pricing; option pricing ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Thema: Renewable energy finance ; Structured finance ; CDO pricing ; LH++ model

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Packham, N.
• Ereignis: Veröffentlichung
• (wer): Springer International Publishing
• (wo): Cham
• (wann): 2021

Weitere Informationen

• DOI: doi:10.1007/s43546-021-00057-6
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ