Abstract

RAMON ARAGONES, José; BLANCO, Carlos  and  INIESTA, Fernando. Modelling credit risk in infrastructure projects. Innovar [online]. 2009, vol.19, n.35, pp.65-80. ISSN 0121-5051.

Evaluating credit risks in infrastructure projects has generally been based on project financing methodology; this is centred on estimating whether generating a project's cash flows is able to ensure the repayment of the debt so incurred. Other credit risk evaluation models, called structural models (such as Moody's KMV), are based on options' theory and are centred on estimating whether the value of assets when the debt repayment period expires will be greater than the value of the debt incurred. This study attempts to analyse both models' differences in measuring credit risk. The results showed that KMV methodology obtained some non-payment probabilities which were very much lower than those obtained by the project financing method. Furthermore, both methodologies' non-payment probability distribution functions were very different. An analysis was also made of which suppositions were more convenient when using a particular method.

Keywords : public-private-partnership (PPP); project finance; structural credit risk models; structured financing; KMV; options theory.

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