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The nature of credit risk in project finance

Author

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  • Marco Sorge

Abstract

In project finance, credit risk tends to be relatively high at project inception and to diminish over the life of the project. Hence, longer-maturity loans would be cheaper than shorter-term credits.

Suggested Citation

  • Marco Sorge, 2004. "The nature of credit risk in project finance," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:0412h
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    References listed on IDEAS

    as
    1. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
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    Cited by:

    1. Jakob Müllner & Sinziana Dorobantu, 2023. "Overcoming political risk in developing economies through non-local debt," Journal of International Business Policy, Palgrave Macmillan, vol. 6(2), pages 159-181, June.
    2. Asian Development Bank & World Bank & Japan Bank for International Cooperation, 2005. "Connecting East Asia : A New Framework for Infrastructure," World Bank Publications - Books, The World Bank Group, number 7267.
    3. Müllner, Jakob & Puck, Jonas, 2018. "Towards a holistic framework of MNE–state bargaining: A formal model and case-based analysis," Journal of World Business, Elsevier, vol. 53(1), pages 15-26.
    4. Torsten Ehlers, 2014. "Understanding the challenges for infrastructure finance," BIS Working Papers 454, Bank for International Settlements.
    5. Müllner, Jakob, 2016. "From uncertainty to risk—A risk management framework for market entry," Journal of World Business, Elsevier, vol. 51(5), pages 800-814.
    6. Kim, Seon Tae & Choi, Bongseok, 2019. "Price risk management and capital structure of oil and gas project companies: Difference between upstream and downstream industries," Energy Economics, Elsevier, vol. 83(C), pages 361-374.
    7. Firouzi, Afshin & Meshkani, Ali, 2021. "Risk-based optimization of the debt service schedule in renewable energy project finance," Utilities Policy, Elsevier, vol. 70(C).
    8. Cruz, Carlos Oliveira & Sarmento, Joaquim Miranda, 2018. "The price of project finance loans for highways," Research in Transportation Economics, Elsevier, vol. 70(C), pages 161-172.
    9. Megginson, William L., 2010. "Introduction to the special issue on project finance," Review of Financial Economics, Elsevier, vol. 19(2), pages 47-48, April.
    10. Choi, Bongseok & Kim, Seon Tae, 2018. "Price volatility and risk management of oil and gas companies: Evidence from oil and gas project finance deals," Energy Economics, Elsevier, vol. 76(C), pages 594-605.

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    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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