• search hit 1 of 1
Back to Result List

Structured climate financing: valuation of CDO on inhomogeneous asset pools

  • 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.

Export metadata

Additional Services

Share in Twitter Search Google Scholar Statistics
Metadaten
Author:Natalie PackhamORCiD
URN:urn:nbn:de:kobv:b721-opus4-34052
URL:https://link.springer.com/article/10.1007%2Fs43546-021-00057-6#rightslink
DOI:https://doi.org/10.1007/s43546-021-00057-6
Publisher:Springer Nature
Document Type:Article
Language:English
Date of first Publication:2021/03/25
Publishing Institution:Hochschulbibliothek HWR Berlin
Release Date:2021/12/27
Tag:CDO pricing; LH++ model; Renewable energy finance; Structured finance
Issue:SN Bus Econ 1, 59 (2021)
Institutes:FB I - Wirtschaftswissenschaften
Open Access Publikationen (DINI-Set):open_access
Open Access Publikations financed by DEAL Project:hybrid
Licence (German):License LogoCreative Commons - CC BY - Namensnennung 4.0 International