Probability of default in infrastructure projects: analysis from structural models of credit risk
DOI:
https://doi.org/10.46661/revmetodoscuanteconempresa.3508Keywords:
credit risk, default probability, stochastic processesAbstract
The purpose of this paper is to estimate the default probabilities in infrastructure projects. For that, we analyze the exposure of the lenders to a state of default. This application is made by assuming the debt service coverage ratio (DSCR) dynamic itself and the payment profile determined by the available cash flow of the project, where these are stochastically modeled following the same assumptions of the valuation theory of options developed by Black and Scholes (1973) and Merton (1973). In this way, through the adaptation of structural models developed for illiquid assets, as an extension of the credit risk models of Merton (1974) and KMV of Moody's, the probability, exposure and loss components of the lenders are analyzed in scenarios of default.
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